Tax doesn’t have to be taxing

Readers of a certain age will recall the title of this piece was a slogan coined by Her Majesty’s Revenue & Customs for an advertising campaign some years ago. They were trying to explain that dealing with your tax affairs needn’t be a complex thing—and to an extent, over the past few years or so, this has proved to be the case.

I am self-employed. I’m a sole trader. I have been such on and off for the past 16 years or so. As one of this growing band of entrepreneurs I must fill out a self-assessment tax form each year. Should I be so lucky as to have had a good financial year and ticked over the minimum income tax threshold, then I dutifully cough up what I owe—as well as half of what HMRC think I might owe next year. Don’t ask.

Anyway, the current bunch of cretins in charge of this fair country decided it would be a spiffing wheeze if we “hardworking” [sic] self-employed types should perform the annual tax return ritual four times a year. You can type the words “tax returns four times a year” into your preferred search engine to find any number of stories about it. Somewhat unsurprisingly, a lot of we “hardworking” [sic] self-employed types were a little upset by the notion, and an online petition was started. Of course I signed it.

Anyway, this last week the signatories received the following email from the Powers That Be:

The Government has responded to the petition you signed – “Scrap plans forcing self employed & small business to do 4 tax returns yearly”.

Government responded:

Making Tax Digital will not mean ‘four tax returns a year’. Quarterly updates will largely be a matter of checking data generated from record keeping software or apps and clicking ‘send’.

These reforms will not mean that businesses have to provide the equivalent of four tax returns every year. Updating HMRC through software or apps will deliver a light-touch process, much less burdensome and time-consuming than it is today.

At the March 2015 Budget the government committed to transform the tax system by introducing simple, secure and personalised digital tax accounts, removing the need for annual tax returns.

At the 2015 Spending Review the government announced it would invest £1.3bn in HMRC to make this vision a reality, transforming HMRC into one of the most digitally advanced tax administrations in the world.

One element of this vision will be asking most businesses, self-employed people and landlords to keep track of their tax affairs digitally and update HMRC at least quarterly via their digital tax account.

Many taxpayers have told HMRC that they want more certainty over their tax bill, and don’t want to wait until the end of the year, or even longer, before knowing where they stand with their taxes.

We also estimate that £6.5bn in tax goes unpaid every year because of mistakes made when filling in tax returns. These reforms will make it easier for taxpayers to maintain accurate and up-to-date tax affairs, reducing the scope for error.

With businesses keeping track of their tax affairs digitally, quarterly updates will be fundamentally different from filling out an annual tax return in a number of crucial respects:

  • Quarterly updates will not involve all the complexity of a full tax return. The updates will be generated from existing digital business records. In most cases, little or no further entry of information will be needed. It will be much quicker to complete than the current tax return.
  • As part of the process the business owner or individual will receive a developing in-year picture of their tax position, helping people have greater certainty about what they owe, allowing them to plan their finances more effectively. This differs from the current system where many taxpayers are caught out by their tax bill when it finally arrives.
  • In-year updates will not be subject to the same sanctions for lateness or inaccuracies as apply now to the year-end position. HMRC will consult during 2016 on what sanctions might be appropriate for a more digital tax administration.

The government has already announced that these measures will not apply to individuals in employment or pensioners, unless they have secondary incomes of more than £10,000 per year from self-employment or property.

The reforms will rely on businesses, self-employed people and landlords using software or apps that can connect securely to their digital tax account. The government will ensure that free products are available. The Gov.UK service will signpost taxpayers to the right product, with clear HMRC guidance about how to choose software.

HMRC will ensure support is available for people to get online if they need it. We will also provide alternatives for those who genuinely cannot use digital tools, like telephone filing. This will build on our Needs Extra Support service, which has gone from strength to strength in helping more vulnerable customers.

We’re introducing these reforms gradually. We’ve been in discussion with stakeholders since March 2015 and will be consulting on the details of the proposals throughout 2016.

We will use volunteers to test the new tools and processes and give us feedback. Quarterly updates will be introduced for some from 2018, and will be phased in fully by 2020, giving taxpayers time to adapt.

We want to work with all stakeholders to ensure these changes work for them. For more information about the proposed reforms please search for ‘Making Tax Digital’ on Gov.UK or use the following link:

https://www.gov.uk/government/publications/making-tax-digital

HMRC

That’s a lot of words effectively saying “stop your whinging and just get on with it”.

In case you glazed over, the important bit—for me at least—was this: “Making Tax Digital will not mean ‘four tax returns a year’. Quarterly updates will largely be a matter of checking data generated from record keeping software or apps and clicking ‘send’.“.

Oh, okay. So what they’re saying is I will have to actually start keeping proper accounts with proper software, rather than maintaining a simple spreadsheet and a box full of receipts which has hitherto been quite adequate. Am I expected to spend money on this software?

“The reforms will rely on businesses, self-employed people and landlords using software or apps that can connect securely to their digital tax account. The government will ensure that free products are available. The Gov.UK service will signpost taxpayers to the right product, with clear HMRC guidance about how to choose software.”

Fair enough, I suppose. However, this still expects me to sit down every bloody quarter and punch in some figures to an online account of my taxes. Just so you know, I haven’t managed earned enough to pay income tax for several years. I don’t find an annual return at all burdensome, and doesn’t actually take me more than a couple of hours with my accountant and about 20 minutes online to complete.

Incidentally, who are these “stakeholders” that have been consulted? I’ve not been asked my opinion on this.

Rather than cutting red tape and the burden of the state, this government seems intent on doing exactly the opposite. (Surprise!) Far from a “light touch” I think it’s going to cause more annoyance than anything else. I’ve got better things to be doing than submitting quarterly updates on my lack of tax-earning ability. Why the hell would I want to keep up with my tax affairs like that anyway?

I guess it’s going to happen whatever we do. My ranting about it isn’t going to change it, so in five years I shall be grumbling about it again as the free software fails to connect to my digital tax account for the umpteenth time because I haven’t updated it or because I’ve had to dig out an old PC to run it because Mac OS or iOS aren’t supported. My guess is it’ll be like every other government IT scheme. It’ll crash and burn, and cost billions to implement, saving nothing in the long run.

This rant is brought to you by HMRC’s web site’s failure to recognise Best Beloved’s online account this year, requiring a postal password reset because he doesn’t have a registered email address with the system. It bodes well, doesn’t it?

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