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Death of the tax return?

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Tax specialist Carolyn Byrne explains about the future of the tax return.

When I first started my career working in tax each pair of employees shared a PC - a marked difference to today’s office where it’s usual for each employee to have their own allocated PC, or laptop and where they may also utilise multiple screens in their work!  

It’s not only the physical use of computers that have changed; today people find themselves engaging digitally as they work via emails, Skype, webinars and of course, internet usage.  

Times have also moved on in the world of tax compliance; as a trainee I learned to deal with  “Notices of Assessment”,  which were basically notifications of tax liabilities issued by the Inland Revenue (as it was then) and that were agreed or appealed as necessary.

A new system of tax compliance was introduced for tax returns for the year ended 5 April 1997 onwards – self assessment.  This was a radical departure from the world of Assessments as the responsibility of reporting taxable income and calculating the tax due now lay in the hands of the taxpayer, or their agent.  As self assessment was rigid in its filing requirements and deadlines, the Revenue introduced the Electronic Lodgement Service (ELS) which enabled approved Agents to electronically submit tax return information for their clients.  

Digital engagement with the Revenue had begun.
By the time Agents were filing tax returns for the year ended 5 April 2004 the popularity of the ELS system had been overtaken by the Revenue’s online internet filing service which soon became the most popular system used by Agents.  So much so that the ELS system ceased to operate in March 2006. 

HM Revenue & Customs (as it became known as from April 2005) has outlined plans to make increasing use of technology with the strategic aim of dealing with taxpayers electronically as far as possible.   In his March 2015 Budget speech George Osborne announced “the death of the annual tax return” and heralded the introduction of digital tax accounts.

“Your Tax Account” launched first which enabled businesses to deal with their tax affairs.  In December 2015 the Revenue notified Agents that a Personal Tax Account (PTA) was now available for individuals.  Unfortunately, these accounts aren’t designed for use by Agents so at the time of writing I haven’t been able to experience whether or not they are straightforward to use or the scope of services they offer.  

HMRC have advised that future tax returns will be pre populated using data that is already held in their systems, for example pay and tax details - albeit that the use of digital tax accounts will actually mean the end of the tax return for many taxpayers.  The Revenue believe that providing taxpayers with the capability to provide them with details of their taxable income at any time, rather than at a fixed deadline, will encourage taxpayers to be more efficient when dealing with their affairs.  
However, approximately 890,000 taxpayers were late submitting their tax return for the year ended 5 April 2014, and therefore it remains to be seen whether digital engagement will prove to alleviate this issue or whether taxpayers will still perceive reporting their tax liabilities as a burden. 

For further advice regarding your tax returns contact Carolyn Byrne on 01522 541181 or email