If HMRC follow through and are successful in implementing digital accounts for all tax payers what future is there for tax practitioners who prepare their clients’ tax returns?
The scope of the changes that will be completed before the end of the current parliament are wide ranging. David Gauke’s forward to HMRC’s publication “Making tax easier: The end of the tax return” is instructive. It was published March 2015. He said:
“As part of the Government’s vision to modernise the tax system, tax returns will be replaced by digital tax accounts for millions of individuals and businesses. They will bring together each taxpayer’s details in one place, just like an online bank account, so they can register for new services, update their information, and understand quickly and easily what they need to pay — without ever having to complete a tax return again.
By early 2016 five million small businesses and ten million individuals will have access to their own digital tax account, and by the end of the next Parliament every individual and small business in the UK will have one. The digital accounts will be simple, secure, personalised to the taxpayer — and accessible through the digital device of their choice. As time goes on, they will offer more and more services.
This will be one of the biggest-ever changes to the way that people manage and pay their taxes. HMRC will make smarter use of the data it holds, linking it up in ways that weren’t previously possible, so that HMRC does more of the work that taxpayers currently have to do for themselves.
In future, people will only need check their tax information online to know how much they owe. Millions of people will no longer have to complete a tax return at all — while those with more complex tax affairs will be able to use their account to declare income and pay tax in year.
It will also be a major help for small businesses, which will be able to link their accounting software to their personalised tax account and have the option to pay as they go. This will give them more certainty about what they need to pay and when, so they can manage their cash flow better. They will also have access to a wider range of government support via a new Single Business Service.
This is a big leap in modernising our tax system, putting good customer service at its heart, and making it as easy as possible for individuals and businesses to pay the right tax at the right time.”
Time will tell if HMRC can deliver the promised changes. However, practitioners should follow progress in this area closely. The adage “when one door closes another opens” is appropriate here.
HMRC may be overestimating the interest and use that taxpayers will make of their digital account. The promised changes are likely to unsettle practitioners as HMRC do not have a good track record for accuracy – it is fine to link up data from difference sources, but what happens if the source data is inaccurate?
And do we really want client’s accounts software linked to HMRC’s digital network?
Compliance in future years may be more concerned with administering and checking digital records for clients, rather than entering data and filing returns. Whilst it may lead to lower fees for completing tax returns, it will open up opportunities to more than replace this income with digital account management services…