Budget 2015 reaction: The death of the annual tax return
Big news for freelancers and small businesses, Osborne announced a drastic change to alleviate the red tape headache of filing a self-assessment return
One of the more notable announcements for freelancers and small businesses in the 2015 Budget report today – George Osborne revealed ambitious plans to end the annual tax return process.
Within five years, a new digital tax system will allow over 50 million people and small businesses to process their tax affairs online, reducing time spent dealing with HMRC to just 10 minutes a year (down significantly from the average 40 minutes a year).
As a first step, all 5 million small businesses and the first 10 million individuals will be set up digital tax accounts by early 2016.
The move, which aims to radically simplify tax administration, was primarily welcomed by the business community.
Murray Pullin, managing director, Zoosme
“The end of the self-assessment tax return is good news for small businesses and individuals. They will be able to manage their cashflow more easily and will spend far less time at key points of the year filling out paperwork. The January deadline has always been difficult as many people are still recovering from the Christmas season and pulling together documentation, sometimes well over a year old, at the very last minute.
“Today’s announcement will help companies even further as they can instantly look at the performance of their business and regularly review the tax position. Amending payments through different seasonal peaks and troughs will be very beneficial.
“I would like further clarification regarding the link to bank accounts; there needs to be assurance for companies that this will not end up being a big brother exercise. That said, by moving digitally the government will be saving costs and smart processes means more money can be spent on public services.”
Graeme Swan, managed services partner, EY
“Plans to scrap paper tax returns are a necessity and a reality in the digital world we now live in. The move to an online individual tax account will make it much easier and simpler for customers, more accurate and less time consuming to update information. It will also protect tax payers by improving compliance and reducing fraud.
“The decision to start with small businesses is also a logical one and will ensure these firms can spend more time growing their businesses, which is vital to the continued growth of the UK economy, rather than spending valuable time dealing with an overly complex UK tax system.”
Mark Abbs, expatriate tax partner, Blick Rothenberg LLP
“Abolishing tax returns is forward thinking and brings the tax collection system into the modern age. It will be very expensive in the short term but should reduce admin costs and improve government cashflow in the long term. We have had similar changes to the UK payroll system (Real Time Information RTI), and whilst there were some technology challenges, on the whole it went pretty smoothly and better than most advisors had feared.
“It became the norm very quickly. Abolishing tax returns is therefore a natural step in the online evolution. A five year time frame is ambitious and there is a lot to do by then to change the rules/framework and especially technology.”
Chas Roy-Chowdhury, head of taxation, ACCA
“This move to the brave new world of digital tax returns will allow people to have a holistic view across the range of taxes they pay. As well as settling their taxes, taxpayers will be able to amend their tax codes and even pay their parking fines online, which is welcome news.
“Many of those filing paper self-assessment forms are self-employed people and those running small businesses who have been using the postal method for many years. They need to be given access to resources which help them move the process online to ensure they aren’t left behind.”
Shalini Khemka, founder and CEO, E2Exchange
“A significant amount has already been achieved by the Chancellor and the Office of Tax Simplification (OTS), and E2Exchange is pleased that the Chancellor will be introducing the digital tax system which will give the self-employed far better control over their tax payments and cashflow.
“However, we would have liked to have seen this extended to small business with more initiatives to further simplify the tax system for companies as it makes it increasingly hard for businesses of all sizes to understand and forecast their tax liability to enable them to remain competitive, expand and more importantly create wealth and jobs.”
Lee Perkins, managing director, Sage UK and Ireland
“The chancellor is to be applauded for making such a bold move by killing off the annual tax return within the next five years. This is a process which causes endless frustration for millions of small business owners and the self-employed. Creating digital tax accounts for all strips out an annual burden, and businesses will welcome steps to make ‘tax less taxing’.
“As the digital economy shifts into the next gear, entrepreneurs and accountants alike are increasingly looking to technology to make their lives easier.”