A New Way of Reporting to HMRC

April 27, 2017

Wills and Probate

A New Way of Reporting to HMRC

Will tax advisers have nothing to do in the future?

A new way of reporting to HMRC
The move to a more digital tax system should come as welcome news to the many taxpayers who already choose to report much of their information to HMRC online.

An outline of returns currently submitted online

  • Self- Assessment 93%
  • Corporation Tax    98%
  • VAT                     99%

Under Self-Assessment a record 9.57 million taxpayers used HMRC’s online Self- Assessment service to file their 2015/16 tax returns, which is up on last year when 9.24 million were filed electronically.

Some 10.8 million Self-Assessment tax returns were completed by the 31 January deadline. That is 93% of the total expected.

On 3lst January, 768,905 returns were received and the busiest time was between 4pm and 5pm, when 60,728 taxpayers or, their agents, clicked submit.

The demise of the tax return
One of the biggest implications for small business owners is the eradication of the annual tax return. By 2020 most businesses, self-employed people and landlords will instead be required to keep track of their tax affairs digitally and to update HMRC at least quarterly through their digital tax accounts, or more often if they would prefer. HMRC has said that this does not mean you will have to complete a full tax return four times a year - you will simply need to provide more regular updates online.

The introduction of a ‘real-time’ tax reporting system means that instead of compiling tax returns and paying liabilities long after the end of the tax year, you will be able to see a real-time view of your business tax affairs and liabilities through your digital accounts. This should make it easier to understand how much tax you owe and to budget accordingly.

So with the move to Making Tax Digital will tax advisers be bereft of work?  That remains to be seen but from previous experience – the introduction of Self-Assessment for example – I am aware that the move to Making Tax Digital seems a tad too quick for many taxpayers and their agents.

Change is not always embraced readily – certainly things will need to be implemented by HMRC in such a way that taxpayers can feel comfortable with the entire process.  It should not be the case the Revenue just surge ahead regardless of the additional burdens that they are placing on the taxpayers but to be more flexible and mindful of their concerns.     

It is likely that the change will generate more work as not all clients are driven by technology or to the desire to update their financial information on a quarterly basis – some I am sure will resist change but the team at HMG are keen to make the whole process as seamless as possible for our clients.       

What will be the benefits of Making Tax Digital
The investment by HMRC will go to serve taxpayers in the following ways:

  • Know where you stand – a full picture of your tax affairs shown in your digital account.
  • Save time – by having access to all your tax affairs including business in a single place.
  • A lot less hassle – by managing all your business tax affairs online.
  • Plan and budget more effectively – with a real-time calculation of how much tax is owed at any given point in time

It is proposed the HMRC will also share information that is held electronically to assist with the digital filing by taxpayers.  This may include information on pay for the year or bank and building society interest details for instance.

If you would like us to review your financial affairs to make sure that you are ready for the changes that lie ahead then do get in touch.

We have experienced staff that will make the whole process for both accounting and tax as simple as possible for you.

Call our Oxford office on 01865 244661.