In his recent Budget the Chancellor announced “We will abolish the annual tax return”. This has attracted a lot of media attention, so what is proposed and will we really see an end of self assessment tax returns?
There is not a great deal of information available at the moment but essentially individuals and businesses will in future be able to manage their tax affairs via a digital tax account. This will be pre-populated with information HMRC already holds. The aim, as the Chancellor said, is that they will no longer be forced to submit an annual tax return.
The digital account is not a new idea and the pre-population of returns is also something that has often been proposed. The new development is to change the way that people interact with HMRC and avoid the current annual tax return filing rush. The digital tax account will also introduce new ways for people to pay their tax, with the option to ‘pay as you go’.
It will take time to introduce these digital charges; they are expected to be in place by 2020. Even if HMRC’s systems work as intended, the information supplied by third parties might be wrong or incomplete.
It should be appreciated that even if tax accounts are pre-populated with information, taxpayers will still need to check that it is correct and inform HMRC of any errors or omissions. We assume that taxpayers will have an obligation to do this, and a deadline by which they must do it. So although actual tax returns might be abolished, the idea of providing tax return information for each tax year is not likely to go away.
Taxpayers will be able to appoint agents such as BWMacfarlane Chartered Accountants to manage their digital account. Both taxpayer and agent will be able to see the same information.
Finally, not everyone is able to use digital services and we understand that there will be a paper tax return filing option for those who need it. So, perhaps its not the demise of the paper return either.