[06.05.16]

Filling in an annual tax return has been a stress many across the UK have endured every January, but help seemed at hand when, in his Budget, the Chancellor announced the “death” of the tax return. However, when you look at what is actually proposed it is clear that this is not actually the death of the tax return and a reduction in compliance, but actually the reverse.

This comes as part of the government’s digital strategy, under which the vast majority of interactions with HMRC will be via digital means rather than on paper or by phone.

• The vision HMRC have set out is about much more than simply adding digital tools to the current system: it is about transforming the UK tax system into something that feels completely different.
• By 2020, HMRC will have moved to a fully digital tax system. The main aims of this vision are that:
• Tax will be simplified – bureaucratic form-filling will be eradicated and taxpayers should never have to give HMRC information it already has, or should be able to get from elsewhere, e.g. from employers or banks
• Tax will be in one place – taxpayers will be able to see their complete financial picture in their digital account
• Taxpayers will have access to digital accounts – Businesses should not have to wait until the end of the tax year before knowing how much tax they should pay. Individual taxpayers will have a personalised picture of their tax affairs, along with prompts, advice and support through webchat and secure messaging.

The government view is that the introduction of the online system should radically simplify the process, and let people pay tax on as “pay as you go” basis. The changes will mean that those with straightforward tax affairs will have no need to collect receipts and other documents. Only those who do not want to manage their affairs online will still have to complete a self-assessment return.

The changes outlined, which will take place over the next four years, will bring about the end of the tax return for millions of taxpayers. Of course, taxpayers will still be responsible for ensuring that their tax bills are correct and telling HMRC about information that is not reported through other means. But digital accounts should make this much easier, quicker and simpler.

Although at the moment it is unclear how this will work in practice, we cannot see how the government’s objective to reduce the burden on the tax payer of form filling can be achieved when the government is looking for continual up to date information on the tax payers’ financial affairs. So instead of the death of the tax return, we may actually see an increase in the number of tax returns.

We will keep you advised on how this will affect you as we learn more.

Castletons Accountants