Tax Return Cancellation – No More Tax Returns? Let’s Party!

Tax return cancellation prospect: Chancellor George Osborne announced last week that he was planning to scrap the annual tax return to simplify the process of paying tax for thousands of self-employed workers. While anything that purports to simplify an HMRC procedure should be welcomed, the supporting facts were slightly hazy.

It seems the idea is for all tax payers to have an online account with HMRC, into which they can submit information, pay tax and interact with HMRC at any point throughout the year, with any information that HMRC can gather electronically from other sources – PAYE from other employment, pension income etc. automatically feeding into the account.

On the surface this seems like a good idea but it does not sound too different from the current system, with the exception of not having to submit the return. Also, while the annual tax return will not be required, there is likely to still be some kind of annual deadline by which all information must be up to date, and obviously the associated penalties for non-compliance.

For a cash business – say a shop or pub – the bulk of the process of recording and collating the information required to calculate the tax liability is likely to remain exactly the same.

Finally, and most importantly, unless the government and HMRC are planning to drastically simplify legislation, the income tax laws will remain the same under the new system, meaning the tax payer will still need to make sure that the information they are submitting is correct and accurate, with all available reliefs claimed correctly, otherwise there is a risk, as there is currently, that they will end up paying more tax than necessary.

Income tax can be a complicated subject and when extra items such as Land & Property income, overseas earnings, child benefit and dividend income come into the mix, things can quickly get quite tricky. And let’s not even start on capital gains tax!

So any technological advancements within HMRC are welcomed with open arms and, whoever is in charge after the general election, let’s hope the project is followed through with the attention and resources it deserves and we can then have January back!