Digital Tax Accounts – Making Tax Easier?
17th December 2015
HMRC are publicising the new Digital Tax Accounts as “Making Tax Easier” but will this be the case?
By early 2016 five million small businesses and ten million individuals will have access to their own digital tax accounts. According to HMRC, these accounts will be like an online bank account and be simple, secure and personalised.
Millions of people will no longer have to complete a tax return but instead will need to check their tax information online. On the face of it, this sounds like a good idea but there will be large number of taxpayers who will not check their information and rely on HMRC getting it right. What happens when they don’t? How far back can a mistake be rectified? If the mistake means that too little tax was paid, what penalties will HMRC charge?
Businesses will have to upload accounting information to their Digital Tax Account in real time, probably quarterly. This will impose a further burden on small businesses. If bank receipts and payments are uploaded directly from business bank accounts, the difference is very unlikely to be the taxable profit for the period. Adjustments will need to be made, for cash transactions, dividend payments, capital introduced into the business etc.
Preparation of annual accounts to accounting rules and standards mean that businesses prepare their accounts using the same rules. I am not sure how this can be achieved if everyone simply uploads information direct from their records.
So Digital Tax Accounts – Making Tax Easier for Who?
Author: Karen Oliver, Tax Manager @ Plus Accounting
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