The digital strategy is gradually taking shape. Although we didn’t get a comprehensive document on the plans – this is promised sometime soon – there were several references to digital matters across the myriad of documents, and piecing them together helps us build some sort of picture about what’s to come.
There are two broad strands: reporting and payment.
On reporting we had confirmation that all small businesses and individuals will have digital tax accounts by 2016-17. But we also learned that by 2020, most businesses, self-employed people and landlords will be required to report details of their income and expenditure quarterly in the tax year. This is a huge change from the current system whereby most reporting is done well after the year end. Individuals and businesses, to say nothing of accounting firms, will have to think radically differently about the way they organise their financial affairs and keep their records. For employees with small amounts – less than £10,000 – of other income, the system differs. HMRC will do the calculation based on information they hold, and use this as a basis of a tax demand. Details are sketchy, but it looks similar to the current system of HMRC providing a tax reconciliation, but this time with legal status requiring payment or a formal appeal. On the face of it, this moves away from the taxpayer taking responsibility for their own affairs and back to the old days when HMRC did the assessing.
The other strand is payment, and there’s one specific change. From 2019 capital gains tax on disposals of residential properly (other than on a principal private residence) will be payable 30 days after completion rather than, as now, 31 January after the end of tax year. There’s also to be a consultation on payment dates for tax generally, and you can be sure this will not propose extending the current payment periods! HMRC will be looking to bring forward the payment date closer to the point at which the profits are earned.
It would be wrong to think of these as mere timing differences. The CGT payment date change is predicted to create a one-off boost to tax receipts of almost £1bn in 2019-20: a change to tax payment dates generally would dwarf this figure. That might help get the Chancellor out of a hole if the rosy picture he painted on the state of the public finances doesn’t quite turn out as expected.