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February 23, 2016

Let’s get digital – HMRC proposes online tax accounts

By Spear's

The government offers a ‘phone a friend’ option for technophobes, says Colin Senez

Everything seems digital nowadays.

It seems as though more and more of us in the United Kingdom (and further afield) are running our lives from behind increasingly smaller laptops, or increasingly larger mobile phone screens. It is now easier to buy food online and have it delivered straight to your doorstep, than visit the store yourself, although, the author does sometimes stop to consider the shortcomings of this way of life when the friendly delivery driver informs you that the carrots you ordered have been ‘helpfully’ replaced by one small, slightly downtrodden looking potato.

But – tax – yes, tax is also being dragged kicking and screaming into the digital age. Within four years, HM Revenue and Customs wants its relationship with taxpayers to have become almost exclusively digital.

The proposal is that tax returns will be as easy to use as an online bank account. So, rather than being confronted with the anxiety-inducing annual tax return, instead the taxpayer will log on to a digital platform and enter the information on an ongoing basis. The idea being therefore that an individual can get a complete picture of his tax position at any given time, and if necessary, update his online profile as and when required. For instance, if you are self-employed and receive a windfall of income after a particular project is complete, then you will be able to input the information and settle the tax immediately.

Advice and support (emotional, I hope) will be offered through a chat tool on the platform. There will also be a virtual assistant, called “Ruth”, although this probably won’t be the same Ruth who is director-general for personal tax at HMRC.

So, what’s the timeline for implementation looking like?
June 2016:  Online accounts will be available.
June 2017:  Income can be reported online and debts can be paid off through the account.
December 2017: Your tax code will be automatically adjusted every month in line with PAYE
June 2018:  Bank interest will appear on the online account.
December 2018: Landlords and the self-employed will start updating their online account quarterly.
2020: Tax is fully digitalised.

This digitalisation of our tax returns has been met with some opposition. Under the plan, every individual including landlords, the self-employed and small business owners must keep track of their tax affairs digitally by updating their accounts ‘at least quarterly’. This obligation to update quarterly has been viewed as onerous as previously there was only one annual obligation; however HMRC have replied by emphasising that updating tax affairs digitally on a more regular basis is a light-touch process not equivalent to doing an annual tax return.

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But what about digital refuseniks? In contrast to my first point, not everyone has resigned themselves to the lure of a blue screen – so what do those who have no need or no desire to use computers do?

The Government has offered that ‘people who genuinely can’t use digital tools will be offered alternatives, like nominating someone else to update their information for them, or giving information by phone’. Opting to ‘phone a friend’ to help them submit your tax return might be a less enticing proposition when Chris Tarrant isn’t overseeing and I can’t say that being put on hold and forced to listen to ‘Eine Kleine Nachtmusik’ would make the process of paying tax any more enjoyable, or easy for that matter.

With that in mind, any measure which can make the process of paying tax less daunting should be welcomed – but I think we can expect some teething issues along the way – similar in nature to my potato-drama.

Colin Senez is an associate at private wealth boutique law firm Maurice Turnor Gardner LLP

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