Chancellor George Osborne has announced the abolition of annual tax returns, stating this has proved ‘complex and costly’ for many UK SMEs and with the new system, information required would be received automatically by the digital tax account.
Mr Osborne’s decision to overhaul the traditional, obligatory year-end tax submission in favour of an online system of ‘digital tax accounts’ by 2020 will be an opportunity for taxpayers to have more control over their tax affairs, according to accounting firm Clement Keys.
The ability to review a tax account online using a device such as a tablet or smartphone will modernise the current system, encouraging individuals & small businesses to login to personalised accounts and update their tax information regularly. This should mean tax liabilities are more accurately reflected long term and allow for tax payments to be spread over the year.
The use of digital tax accounts also means businesses will have the ability to link any existing accounting software to the tax account, reducing administration, whilst helping small businesses to meet tax deadlines & avoid penalties.
Adam Longmore, Director of corporate tax services at Clement Keys, states that small businesses can find it difficult to submit tax returns on time and in the specific format required by HMRC. Moving to digital tax accounts is a positive step which many small and medium-sized businesses will benefit from, as well as being a more effective method of managing cash flow.
Senior tax partner at Blick Rothenberg, Mark Abbs was quick to examine the drawbacks, stating that it is likely to take up to five years before the system is fully operational and also the preliminary implementation costs would be high.