In its continual quest for money-saving efficiencies, HMRC is no different from any other government department having to manage the demands of fiscal austerity. Migrating from a paper to a digital system of tax returns was therefore always going to be a priority and this revolution is now about to become a reality with the chancellor’s budget announcement that income tax returns will be phased out and replaced with digital tax accounts by the year 2020. In a timely article, leading tax accountants, Baker Tilly, have recently been assessing the likely implications of this transition.
Between next year and 2020, some 50 million businesses, individuals and their tax accountants will be able to view their current tax position in real time online. Most of us have realised for some time that, if big brother is not actually watching us, he is watching our bank accounts. Whether or not this is a welcome development has to be the subject of another discussion, but the fact remains that HMRC’s IT systems can automatically access an increasing amount of data which we, or our tax accountants, would hitherto have to assemble in order to complete paper tax returns.
By linking to financial institutions and other agencies, HMRC will be able to fill in most of the fields previously handled by tax accountants when completing paper returns. The result is that we will be able to log into our accounts and check that the data is either broadly right or, if we in conjunction with our tax accountants are prepared to do all the work that we used to do, that it is exactly right. Then it is presumably simply a question of filling in any fields that were left empty.
Clearly, this new system looks like a boon for all those who were only ever sent a paper return because of an incidental factor such as becoming a company director or they had started earning over £100,000 p.a. These people should now be able to complete their filing without very much input or assistance from their tax accountants.
The people who will probably still need to enlist the help of professional tax accountants, might include those who receive overseas income or who have complicated tax affairs perhaps involving offshore trusts. Similarly, people with business profits who are advised by expert tax accountants will require that the correct “adjustments” for tax purposes are made since some items in the accounts are not deductible for tax purposes while there could well be additional deductions to be made elsewhere.
The fact remains that information technology might make many aspects of tax returns simpler but no one has yet mentioned anything about the huge volume of tax legislation being rationalised any time soon. HMRC are highly unlikely to start pointing out tax planning ideas that individuals have overlooked on their returns so it seems certain that specialist tax accountants will still have a vital role to play.
If you feel that you may be already paying more tax than you should or have any query at all about filing correct tax returns, the specialist team of tax accountants at Baker Tilly would be only too pleased to assist.