Submitted by Sestini & Co
| on Fri, 03/20/2015 - 20:15 | In Uncategorized
There was much excitement* on Wednesday when the death of the (annual) self assessment tax return was announced. I experienced a fleeting moment’s thought as my self assessment tax return list flashed up in the recesses of my brain and I wondered how business would look without that work cycle every year.
But of course, income reporting for personal tax and tax computations are not going to go away. Although the announcement and paperwork released to date is short on detail, this is to all intents and purposes the self assessment equivalent of RTI, the real-time initiative for payroll. Something which was once a paper exercise (and for some, recorded on magnetic tape) is now a monthly online submission with, one assumes, constant HMRC interaction and monitoring. As any payroll provider will tell you, the advent of RTI did not spell the “death of payroll”. If anything, RTI requires a higher standard of record-keeping, greater vigilance over changes to the status quo and better reporting systems….and payroll is very much here to stay.
So what will the proposed changes mean?
– taxpayers (initially a trial group of individuals including the self employed) will be allocated an online tax account;
– information already available to HMRC, including bank interest, employment income and pension contributions will be automatically uploaded to this account as HMRC receive it, so there is no need to re-input it into a separate tax return;
– information from online accounting software will also be capable of being linked in to these accounts, so there is no need to re-input it into a separate tax return. Presumably a similar mechanism can be worked out for rental income and expenses;
– taxpayers will need to log into their accounts periodically to check the information and upload additional data, e.g. private transactions, overseas income and other matters not being automatically uploaded to the account;
– taxpayers will be able to see a calculation of their tax position at any point and make tax payments accordingly;
– taxpayers can opt out and file a paper tax return if they wish.
In theory, this should stop the rush to submit returns before the 31 January deadline and spread HMRC’s workload and receipts of tax payments more evenly throughout the year. That said, to reduce the impact of technical glitches, presumably there has to be a point (or points) in the year where the taxpayer confirms the information in their account is correct and final, and there would need to be a time limit for this confirmation.
There would also need to be a mechanism for the taxpayer to choose how to utilise certain reliefs, such as loss relief where there is a choice of which year and against which type of income the loss is claimed.
So whilst the annual self assessment return won’t be here in its current form in a few year’s time, taxpayers will still need to keep records and will need a process in place to ensure HMRC has all of their tax information and that the available reliefs have been claimed in the most beneficial manner. Overall, this should provide an opportunity to spend time reviewing the data and considering the implications rather than adding up receipts and inputting information which HMRC already have.
If you’d like to discuss any of the matters raised, please contact us on 01761 241861 or at firstname.lastname@example.org.