For some while, HMRC have been talking about bringing the UK tax system into the modern world by “making tax digital”. Such a development is well overdue given the widespread use of the Internet and technology and few of us these days do not have access to a computer.
Needless to say, the UK is well behind other countries. For example, Brazil introduced a new system back in 2006 which phased out the traditional tax return. With the latter, you collate and summarise your financial information onto an annual tax return and submit this to the tax authorities, either digitally or by paper if you have difficulty with change. With the new sysyem, the tax authorities interrogate your accounting software and produce a tax assessment based upon the information obtained. Australia and New Zealand too are bringing in a similar system, again phasing out the need to submit a tax return to their tax authorities.
Of course, in practice one wonders whether such a system should be reserved for larger businesses that can afford regular accounting assistance, since for many small businesses the information on their accounting software is either out of date or inaccurate. Just what the tax authorities would do when faced with such useless information remains to be seen, since these days, they certainly could not afford widespread tax audits. They will probably fall back on their favourite strategy of imposing heavy penalties.
In the UK, HMRC have taken the opportunity of taking a step backwards and amazingly, rather than phase-out the annual tax return, they seem to be suggesting that instead, businesses and landlords will be obliged to submit five tax returns per year. Speaking as someone who has made a good living out of tax returns over the last 34 years I suppose I should not be complaining, but as everyone in business will know, the annual tax return process is a very difficult process for many, best put off until the very last minute. Imagine then, how taxpayers will feel about having to submit five tax returns every year.
Up until recently, some accountants were beginning to worry about their future job prospects. It seems that we accountants are going to be busier than ever!