Chancellor calls time on annual tax return
Chancellor Osborne announced in today's Budget 2015 speech that the annual tax return is set to be phased out within five years.
The revelation was leaked this morning but fleshed out in detail during the hour-long speech. It's outlined in the government document 'Making Tax Easier'.
HMRC will instead collate the tax affairs of taxpayers from employers, banks, investment firms and other third parties into a single, digital tax account.
For businesses, HMRC and Companies House will be streamlining the process to register a new company and sign up for taxes by May 2017.
In addition, during the summer the government will consult on a new payment process to enable tax and NICs to be collected through digital accounts instead of self-assessment.
By early 2016, all of the UK’s 5m small businesses and the first 10m individuals will have access to their own digital tax account.
The Chancellor said the move will reduce the time it takes to deal with HMRC from an average 40 minutes a year to 10 minutes. The changes will mean receipts and documents won't have to be collected by taxpayers throughout the year.
According to David Gauke, financial secretary to the Treasury, this is one of the "biggest ever changes to the way that people manage and pay their taxes".
Some AccountingWEB members are split in opinion about this change. Some are worried that it will drive business away from accountants, and others say that it will create more work.
Commenting on an Any Answers post this morning, Shogun said: “Hopefully, small business owners will still need us to save tax. I doubt that they can scrap tax returns for traders because of the expenses. If they do try to do that, it will create unprecendented chaos and more work for them which they don’t want.
"Without accountants the tax system will collapse."
ACCA's head of tax Chas Roy-Chowdhury said giving taxpayers a "holistic view" of the tax they pay is welcome news.
But, it must be done properly.
He said the announcement "is part of the government’s push to get the tax payer to do more as HMRC’s resources continue to be squeezed by 5% cuts year on year. A change of this magnitude must be properly planned to ensure there are no problems with the roll out.
"It is imperative the public are able to embrace the move to a digital tax future if the government aer to be successful in this scheme."
In particular, those still filing paper returns must be given the right tools, support and guidance to transition to digital to ensure they are not left behind.
AccountingWEB tax policy editor Rebecca Cave took a sceptical stance: “We know with RTI that when information it gets to HMRC it goes through a series of Chinese whispers and ends up different to what you submitted.
“If that can go wrong with PAYE data, imagine what else could happen. They’ll put that in an electronic account and tax you on it without you signing anything. They do seem to be trying to run before they can walk, because we know it doesn’t work at the moment.”
There are many questions still unanswered, such as one posed by Jennifer Adams: "How will this tie in with the new penalty system?" Rebecca Benneyworth commented that this policy will require a "big" consultation.
AccountingWEB will be keeping a close eye on this for further developments.