A New Era for Tax Reporting

As the dust settles in accountants’ offices up and down the country after the annual January rush to meet the deadline for Self Assessment tax returns, it’s the perfect time to look ahead to the new Digital Tax Accounts that were first announced back in the March 2015 Budget.

The Government have set out plans to modernise the current tax system, making the current returns a thing of the past. Instead, there will be a digital online account for millions of individuals and businesses, where all tax affairs can be viewed, giving an up-to-date tax position at any time. The thought process behind this is to ensure that people can stay on top of their tax affairs rather than having a sudden liability after they produce their year-end return.

The idea has not gone down well with everybody though. Concerns have been raised over the additional burden of reporting, with initial details revealing that the online accounts should be updated “at least quarterly”. With the promise of penalties for those who fail to comply, the thought will send shudders down the spine of the less organised amongst us.

There may be further concerns about what HMRC are planning to do with the additional wealth of information that they will have at their disposal. Few could argue that the new plans are not considerably more intensive and possibly intrusive than those currently in place, but whether this leads to an increase in Tax Enquiries remains to be seen.

Enough people have been willing to make their thoughts known on the subject, with a Parliamentary debate taking place on 26th January 2016, following 110,300 signatures on an online petition against the plans. It seems that this will not be enough to dampen proceedings though, with the Government response stating that “Making Tax Digital will not mean ‘four tax returns a year’. Quarterly updates will largely be a matter of checking data generated from record keeping software or apps and clicking ‘send’.”

As we await further details throughout 2016 following consultation, it remains to be seen whether their “Bold vision for a new, modern tax system, which will make it easier for all taxpayers” can live up to its own billing, especially in the eyes of those not currently keeping regular management accounts on computerised systems, and those none too excited at the prospect of making more regular tax payments.