You may have seen headlines in the press announcing that self-assessment tax returns are going to be abolished. As is often the case the reality is rather different from the glaring headlines. However, HM Revenue and Customs (HMRC) is now finally joining in the digital revolution and its vision is that by 2020 personal taxpayers and businesses will be able to register, file and update their information at any time day or night and at any point in the tax year, by accessing a new ‘digital tax account’. HMRC have described the digital tax account as operating rather like online banking. Instead of submitting an annual tax return many months after the income is received, a taxpayer’s digital tax account will be pre-populated with information provided directly to HMRC by employers, banks and building societies etc. Individuals will still have an obligation to inform HMRC of their income and gains where HMRC can’t obtain the details itself from other sources. Under the new regime the reporting obligations for self-employed taxpayers and some landlords will increase to include updating HMRC (in a digital format) with details of their taxable profits every quarter; this is the much publicised ‘quarterly reporting’. As now, we can help with HMRC reporting but for some clients this may mean that their financial records will have to significantly improve and others will no longer be able to put off dealing with their tax affairs until the tax return filing deadline is looming.
For those clients with simple tax affairs a self-assessment tax return may not ultimately be required. However, our help is likely to be needed to ensure that HMRC has all the relevant information, that the information it holds is correct and that its tax calculation is right and deals with all tax reliefs and claims correctly. For other clients with more complex tax affairs, including those with foreign income or gains, the completion of an annual tax return will still be required.
2020 may seem a long way off but taxpayers should already be able to access their digital tax accounts. From April 2018 everyone who is self-employed and those receiving rental income will need to update HMRC quarterly where it is their main source of income (or a secondary source of income above £10,000 and their main income is employment or a pension). We therefore need to start preparing our own tax compliance processes to ensure that the transition to the new regime is as smooth as possible for our clients and to help them understand what the new regime will mean for them, including helping them make any changes that may be required to their financial record keeping. Much of the detail on how the new regime will work has yet to be finalised and HMRC will shortly be issuing a consultation document. We will be following developments closely over the next 6 months or so and we will be writing to our clients when we have more information on how the new regime will impact them.
RMT Ref 140/04.16/SL