HMRC announced it would make its new digital tax accounts, available to everyone from April 2016, mandatory to the self-employed first.
From 2017-18 most businesses, including those who are self-employed and landlords will be expected to update HMRC four times a year concerning their tax affairs. Everyone else liable for self-assessment will be on board by 2020.
Extra detail was announced as to how the digital tax account - part of HMRC's ongoing digitisation plans - will work, this week.
HMRC will consult on how third parties - such as banks and building societies - could supply them with information for business' tax returns to avoid duplication - a similar idea to one they had previously considered for other digital programmes such as GOV.UK Verify.
HMRC's reasons behind bringing everyone online is so they can make it easier for people to see tax liabilities and pay them, can spot tax avoidance earlier and, as they say, a large number of tax returns are done online now, anyway.
In announcing the detail, financial secretary to the Treasury David Gauke said while it's the death of the tax return, HMRC expects businesses to keep digital records and update HMRC on a quarterly basis. But these updates will be done through software or apps and will be integrated into business' digital record keeping.
'And I want to stress... this is not going to feel like doing four tax returns a year. Indeed, we expect these reforms to ease the admin burdens on businesses and to help them plan their cash flow more easily, by providing greater certainty about what they will owe.'
There will be exemptions for those who can't file online for reasons such as religion, disability or otherwise.
HMRC's putting an emphasis on the fact you can check and do your tax returns anytime, from anywhere - something that will save them money as they digitise, close down offices and 'upskill' their workforce.
From Spring 2016, the government will consult on whether the new rules should apply to charities, sports clubs and other trading subsidiaries In all, you'll get a single digital overview of all taxes in one area and HMRC through your digital tax account.
However some tax bodies are warning the new rules could spell bad news and a red tape burden for the self-employed and small businesses.
They said the new announcements 'widen considerably the functionality of these accounts, seemingly placing greater burden on individuals, businesses, the self employed and landlords to actively manage and track their tax affairs digitally'.
Anthony Thomas, chairman of the LITRG, added that extending the use of the accounts to enforce more regular reporting by the self-employed 'seems to us to show a total lack of understanding of the financial awareness of many business owners; even with exemplary records it might be very difficult for a business owner to report an accurate profits figure other than at the year end, unless they employ an accountant to help them.
'We would be very concerned if this proposal goes ahead without significant consultation, since the additional burdens for self-employed people both in terms of administration and potential costs will almost certainly be substantial enough to discourage entrepreneurship altogether,' he said.
He warns that while accountants with small business clients will see business boom, small businesses themselves will see a drop as they are put off
"The intention is to improve processes and save small business owners time and money. Instead of dealing with multiple HMRC touch points, the new digital tax platform aims to bring personal tax, corporate tax and VAT into one portal.
'It should cut the admin burden and let owners focus more on the day-to-day running of their businesses. Crucially, it will give a more real-time view of tax due and also introduce flexibility regarding tax payments, which will help with cashflow planning.,' Sharma said.
But, he added, the system won't be rolled out until next year or be fully implemented until 2020. So small business owners, and the self-employed, need to keep on top of any proposed changes and understand that the system is no quick fix.
'It will take time before they see the benefits,' he added.
Kevin Hart, BASDA chairman, said the document consolidates numerous separate pieces of information that have entered the public domain and confirmed speculation in the industry with regard to timeframe.
He added that BASDA is working with HMRC and HMT regarding the new digital accounts'.
'Continuing dialogue is critical here to determine exactly what form these may take and, critically, ensuring the right fit with customers' processes. It is here where considerable focus is required to ensure we achieve the right level of alignment and balance between the department's aspirations and the regulatory burden from the customer's and industry's perspectives and so achieve the best outcomes here,' Hart told BusinessZone.
However, we'll have to wait until 2016 to fully know what the new accounts will look like, after government consultations and their roll-out.
From 2017-18 most businesses, including those who are self-employed and landlords will be expected to update HMRC four times a year concerning their tax affairs. Everyone else liable for self-assessment will be on board by 2020.
Extra detail was announced as to how the digital tax account - part of HMRC's ongoing digitisation plans - will work, this week.
HMRC will consult on how third parties - such as banks and building societies - could supply them with information for business' tax returns to avoid duplication - a similar idea to one they had previously considered for other digital programmes such as GOV.UK Verify.
HMRC's reasons behind bringing everyone online is so they can make it easier for people to see tax liabilities and pay them, can spot tax avoidance earlier and, as they say, a large number of tax returns are done online now, anyway.
In announcing the detail, financial secretary to the Treasury David Gauke said while it's the death of the tax return, HMRC expects businesses to keep digital records and update HMRC on a quarterly basis. But these updates will be done through software or apps and will be integrated into business' digital record keeping.
'And I want to stress... this is not going to feel like doing four tax returns a year. Indeed, we expect these reforms to ease the admin burdens on businesses and to help them plan their cash flow more easily, by providing greater certainty about what they will owe.'
There will be exemptions for those who can't file online for reasons such as religion, disability or otherwise.
HMRC's putting an emphasis on the fact you can check and do your tax returns anytime, from anywhere - something that will save them money as they digitise, close down offices and 'upskill' their workforce.
From Spring 2016, the government will consult on whether the new rules should apply to charities, sports clubs and other trading subsidiaries In all, you'll get a single digital overview of all taxes in one area and HMRC through your digital tax account.
However some tax bodies are warning the new rules could spell bad news and a red tape burden for the self-employed and small businesses.
Red tape burden concern
The Low Incomes Tax Reform Group (LITRG), a charity, is worried the frequency with which the self employed would report to HMRC would add to their workload.They said the new announcements 'widen considerably the functionality of these accounts, seemingly placing greater burden on individuals, businesses, the self employed and landlords to actively manage and track their tax affairs digitally'.
Anthony Thomas, chairman of the LITRG, added that extending the use of the accounts to enforce more regular reporting by the self-employed 'seems to us to show a total lack of understanding of the financial awareness of many business owners; even with exemplary records it might be very difficult for a business owner to report an accurate profits figure other than at the year end, unless they employ an accountant to help them.
'We would be very concerned if this proposal goes ahead without significant consultation, since the additional burdens for self-employed people both in terms of administration and potential costs will almost certainly be substantial enough to discourage entrepreneurship altogether,' he said.
Barrier to starting up?
Richard Murphy, political economist, blogged that he thought it would become 'the biggest obstacle to the setting up of new small businesses in the UK that there ever has been, so onerous are its obligations'.He warns that while accountants with small business clients will see business boom, small businesses themselves will see a drop as they are put off
Good intentions
Bivek Sharma, head of KPMG Small Business Accounting, told BusinessZone that the new digital tax system does have good intentions, however."The intention is to improve processes and save small business owners time and money. Instead of dealing with multiple HMRC touch points, the new digital tax platform aims to bring personal tax, corporate tax and VAT into one portal.
'It should cut the admin burden and let owners focus more on the day-to-day running of their businesses. Crucially, it will give a more real-time view of tax due and also introduce flexibility regarding tax payments, which will help with cashflow planning.,' Sharma said.
But, he added, the system won't be rolled out until next year or be fully implemented until 2020. So small business owners, and the self-employed, need to keep on top of any proposed changes and understand that the system is no quick fix.
'It will take time before they see the benefits,' he added.
Working for improvement
And the announcement isn't simply 'how things are going to be'. Bodies such as the Business Application Software Developers Association (BASDA) are working with HMRC to ensure a good outcome for the end user.Kevin Hart, BASDA chairman, said the document consolidates numerous separate pieces of information that have entered the public domain and confirmed speculation in the industry with regard to timeframe.
He added that BASDA is working with HMRC and HMT regarding the new digital accounts'.
'Continuing dialogue is critical here to determine exactly what form these may take and, critically, ensuring the right fit with customers' processes. It is here where considerable focus is required to ensure we achieve the right level of alignment and balance between the department's aspirations and the regulatory burden from the customer's and industry's perspectives and so achieve the best outcomes here,' Hart told BusinessZone.
However, we'll have to wait until 2016 to fully know what the new accounts will look like, after government consultations and their roll-out.
