Budget Comment: Is the end of the tax return the thin end of the wedge?
- Credit: Archant
Danny Clifford, tax partner at Ensors Chartered Accountants, considers the implications of changes to the end-of-year tax return.
It always seems slightly pointless to go too deeply into specific measures announced by a Chancellor in a Budget statement that immediately precedes a General Election.
George Osborne can wax lyrical about what he intends to do but of course the electorate may not give him the opportunity.
There were, though, some interesting measures announced that are likely to be followed through regardless of who is in power, and “abolishing the end of year tax return” is one that certainly catches the eye – but then I imagine it was supposed to.
It will be interesting to see exactly how this works through. On the face of it I foresee little change in that those who rely on agents (such as Ensors) to complete their tax filing obligations are likely to continue to do so under the new regime given that the onus remains with the taxpayer to ensure all relevant information is disclosed to HM Revenue & Customs.
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Those with very straightforward affairs should be able to log on and check that all of the entries they would previously have made on a return have been correctly picked up by HMRC from their employer, bank and pension provider, etc. Effectively it should remove the need to input the data, assuming HMRC’s figures are correct.
On the face of it I am in favour of the proposal, but long and bitter of experience leaves me nervous that I am only glimpsing the thin end of a wedge.
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HMRC are expecting many more people to operate “digital accounts” than currently file self assessment returns. Many basic rate taxpayers rely on HMRC to give them a code each year and to deal with tax collection with no particular input needed from the individual. Will they now have to log on and check their digital account?
If there is a thick end to this wedge, could it be that if you do not click on an “accept” button (or else enter alternative information) by a certain date there will be penalties? By forcing everyone to accept/reject the information you are, of course, forcing an explicit declaration that everything has been reported. So if the information is incomplete and that is not spotted, again will there be penalties? Tax advisors have always been alert to this but will individuals who are new to the game be so aware? My sceptical side tells me HMRC are not going to easily let go of a penalty regime and source of revenue that they have spent the last decade building up.
My favourite HMRC statement on this topic is that people will be able to pay their tax “when it is most convenient for them to do so”. Before anyone gets too exited, I strongly sense this means earlier than now – not later. Which leads me to another concern. If all your information is online by April 6 and you can check and confirm that by, say, April 30, why not ask you to pay any tax due then – some nine months earlier than you have to pay it now? I am sure that the thought of collecting tax earlier has not occurred to HMRC at all...