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The UK government is launching the biggest overhaul to the tax system since self assessment started. It is revolutionising the tax system, bringing the death of the tax return with it. The government is transforming the tax services it provides and has visions for providing a tax system where tax payers have digital accounts so time delays are eliminated and bureaucratic form filling is removed.The government anticipates this digital system will be implemented by 2020. However, there is worry among the small businesses that the government’s ambitions may prove too costly to implement due to the financial impact and practicality for the small businesses themselves.
Large businesses and VAT registered businesses currently report their income and expenses to HMRC four times a year through VAT Returns and a quarterly instalment for Corporation tax.
By digitalising the tax system, it would lead to information being relayed to HMRC four times a year, instead of once a year as it currently is. Although the government has published leaflets about this overhaul, they have not issued any specific guidance, which has led to scaremongering among small businesses, tax professionals and accountants.
During this digital era, it makes sense for the tax system to become digitalised. Providing information in real time will not only assist in HMRC assessing the businesses tax liabilities in real time, it will provide business owners with information in real time as well, which can be used for making decisions.
For the treasury, it is envisaged that the most important point is that tax will be collected early , i.e during the tax year rather than approximately 10 months after the end of a tax year. This will lead to tax being distributed around the economic and welfare system quicker, with commentators speculating that the government wants the early collection of tax to reduce the borrowing deficit quicker.
For accountants, information will be provided to them four times a year rather than once a year. This will be helpful for those clients who find it difficult to provide information, as the threat of four penalties for late filing may prompt and educate them to provide information on time.
HMRC hopes by pre-populating the tax return with sources of income, self assessing will become easier, quicker and less stressful. However, tax practitioners and accountants are concerned whether HMRC can deliver an IT system that can cope with such demands, bearing in mind the problems businesses have had with auto enrolment.
HMRC has commented: “By 2020 HMRC will be a world-leading tax administration that is efficient, effective and easier for customers to use, enabled by £1.3bn of extra investment announced in November’s Autumn Statement.”
Sadia Ajaz of Avery Clifton has stated, “HMRC should consider the needs of the different types of taxpayers in the UK. Whilst they are making policy and regulations, they must consider the regard from the rights of the tax payers and the law of the land to ensure particular types of tax payers are not at a disadvantage from HMRC’s latest overhaul.”
For more information you can visit Avery Clifton’s website:http://averyclifton.com
The tax and accountancy profession, along with small businesses keenly await detailed guidance on the death of the tax return.
Contact Info:
Name: Sadia Ajaz-Moir
Email: Send Email
Organization: Avery Clifton
Address: 77 Albert Road, Caversham, Reading, RG4 7AW
Phone: 0118 907 9224
Website: http://averyclifton.com
Release ID: 101213