We’ve heard about the government’s Making Tax Digital project before – whereby the tax system will change from a single annual return into a continuous assessment of what you owe which is carried out online – but now further details have been revealed about the scheme, which should come into play by the close of this decade.
Following a lengthy consultation with small businesses and self-employed folks across the UK, the government is making all the right soothing noises when it comes to assuring firms that transitioning to a new way of making a tax return won’t end up being a headache.
As City AM reports, those assurances include the fact that SMBs can still use spreadsheets to keep track of financial details like expenses and so forth, with these able to be linked to software which will automatically provide these details to the tax office. The government is underlining the fact that the software will be user-friendly, and indeed that free software will be available for those firms with ‘straightforward tax affairs’ (i.e. smaller operations).
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Avoiding costly errors
The theory is, then, that going the continuous assessment route rather than having to handle one big unwieldy return should be more convenient for the taxpayer or small business in question, and on the government’s side, considerable savings are expected to be realised in terms of reducing the number of errors made in tax returns.
In fact, HMRC estimates that the new system could help to avoid errors which cost the government no less than £8 billion every year. No small sum indeed…
It’s aiming to introduce the digital tax return by 2020, although there will be some breathing room given for acclimatisation, with those filing returns getting 12 months grace to become familiar with the new method before any penalties are exacted for making a late filing.
As the government puts it: “At the moment most taxpayers cannot see a single picture of their liabilities and entitlements in one place – we are changing that. By 2020, customers will be able to see a comprehensive financial picture in their digital account, just like they can with online banking.”
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