Simon Littlejohns, Partner and Head of Tax at Birmingham chartered accountants and business advisers Friend Partnership, discusses the recent developments in digital tax.
The IT boffins at HMRC have announced that by 2020 all businesses and individuals will be able to manage their tax affairs online.
This is being heralded as a great move for taxpayers which will enable them to manage their tax affairs more efficiently. What HMRC have been less vociferous about is that the new digital regime will require certain taxpayers to pay tax sooner than they do at present.
The proposals have created quite a storm in the tax community especially with regard to smaller businesses which are already suffering from an unacceptable level of bureaucracy.
- HMRC will require taxpayers to maintain their tax affairs on a quarterly basis;
- The quarterly reporting will also require quarterly tax payments in certain cases – an acceleration of tax payments from the position we have now;
- Whilst the new approach may eliminate some paper returns quarterly reporting could create a tremendous burden of extra work for many taxpayers, or their advisers, particularly small businesses suffering under the weight of red tape and potentially without the IT systems that may be needed to comply;
- Garbage in Garbage out – just because information is collected digitally does not mean that it is correct;
- Not all information can be collected digitally – this is where the extra work will be necessary;
- As a result taxpayers may have to get extra professional help to sort this or indeed get professional help when none is needed at present. As a result this may be more expensive than the existing annual arrangements;
- Taxpayers are being promised free software to help with this process. However, will the software be compatible with existing commercial software or will taxpayers have to pay out for additional/improved software;
- HMRC, in what might be described as a heavy handed approach, have completely overlooked the fact that there are many taxpayers who comply with the current tax filing requirements without any recourse to the digital world. This may be through choice, cost constraints, religious grounds or an inability to master the technology. How are these taxpayers going to be accommodated?; and
- HMRC are considering their proposals during the course of 2016. However, will HMRC listen or will they plough on with their heavy handed approach seemingly unaware that there are many who have no wish to join the digital age.
The professional bodies are making their views known to HMRC on behalf of their members with the general thrust being that whilst the moves are generally positive the potential burdens that this move will place on individuals and businesses must be considered.
It is also interesting to note that there is an online petition calling for HMRC to abandon/materially modify the proposals.
Once the detailed proposals become clearer we will be working with our clients and others to ensure that the impact of any changes is managed in a positive manner.