Do HMRC think you're simple?

The enthusiastic march to a digital future continues as the government plans to invest £1.3bn on a digital tax administration system, leading to the abolition of the tax return.

Many of the people now in self-assessment will instead be required to update a digital account quarterly to keep track of their tax position. Many elements of the digital account, such as PAYE or bank interest should be pre-populated by HMRC. There will be apps and software to ease this communication. If the system works as intended this will be impressive.

This all sounds very helpful until you realise it tightens time limits radically for information gathering, accelerates tax payment dates and potentially multiplies compliance costs for represented tax payers. You will need to look at your self-employment or property income four times a year instead of once, and your accountant will need to preform quarterly checks.

Not all taxpayers will be drawn into this new system. Individuals in employment, and pensioners with other income of less than £10,000 per annum, will not be included. They will instead be in 'simple assessment' where HMRC will gather all of their tax return information and then issue a demand for payment, which they can then appeal if it is wrong. The issue of assessments by HMRC seems like a blast from the past for older tax advisers, it is concerning that this treatment will apply to the section of the public which is likely to be unrepresented and the least digitally literate. HMRC says they will offer support. We hope this is adequate and accessible without the use of computers. It is a shame they will not be able to go to their local tax office for aid, as, from last week’s announcement it will probably have closed down.

If you would like advice on the topics raised in this article, please contact Andrew Hubbard.