As part of the government’s first ‘Tax Day’ in March, HMRC called for evidence on how legislation underpinning its administration of the system could be updated.
It is the start of a process that could have major implications for more than a million small businesses and over 11 million self-assessment taxpayers.
The call for evidence is the start of a conversation about the benefits and challenges of current tax payment timings, and for moving to more frequent, in-year tax calculation and payment.
The discussion is about the possibility of bringing the payment of tax closer into line with the increasingly “real-time” nature of tax reporting and other services.
The call for evidence on the tax administration framework review (TAFR) follows the publication of HMRC’s 10-year tax administration strategy last summer.
The government says a reformed framework is key to harnessing opportunities that will “drive up productivity and innovation” as the UK’s tax system becomes increasingly digital.
Writing on the Institute of Chartered Accountants in England and Wales (ICAEW) website, Anita Monteith, its technical lead and senior policy adviser, says: “The more I read the different elements of the paper, the more I can see a big digital plan for the future.”
She believes the aim is to build a system that is digital from the original transaction, through processing and reporting, taxing the profit and paying the tax. With everything taking place much closer to real time.
And she adds: “At the heart of TAFR is how to deal with information digitally. It’s about more logical recording of data and more timely access to it.”
The call for evidence and the consultations that will follow is also time for taxpayers to start preparing for this digital tax system, according to Monteith.
She says: “If I had to give one piece of advice now, it would be sort out your record keeping so it is digital.
“Don’t try and take a shortcut, take the time to find a solution that meets your needs.
“Shop around and make sure you understand the product and choose one that will have some longevity.
“That way it will be your software provider who is going to be doing the heavy lifting to meet the requirements in future.”
WNJ can help you with that move towards digital and with cloud accounting. We have a dedicated team of experts on hand to provide advice, support and training.
To discuss any issues raised in this article please call WNJ on 01772 430000.