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A Digital Tax System: For Better or Worse?

A Digital Tax System: For Better or Worse?

Adam Harper, AAT

In 2012, the Government announced its plans for making public services ‘digital by default’ – the idea that digital services will be so straightforward and convenient that all capable of using them will choose to do so whilst those who can’t are not excluded.

The decision to become truly ‘digital’ as outlined in the Government’s Digital Strategy is based around a number of factors including cost, productivity and growth. Moving services to digital channels is estimated to save between £1.7 and £1.8 billion a year. While the private services sector has grown by 30 percent over the last decade, the public sector in comparison has fallen behind and remained fairly static. With this in mind, it’s safe to say that a ‘digital revolution’ across public services is necessary.

In order to achieve the goal of providing timely and cost-effective processes to the public, the government has placed particular focus on digitising transactional services across a range of departments including HMRC. As a result, the redesign of widely used financial services and processes is well under way in order to meet new standards by April 2014.

A key priority for HMRC in the Government’s Digital Strategy is to improve the overall taxpayer experience. It is doing this by putting measures in place to enhance the professionalism of its staff and to increase and strengthen digital elements of its customer-facing processes.

At the start of the year, we saw the introduction of Real Time Information. It forced employers of all sizes to adapt to new payroll reporting requirements including the online submission of information each and every time they pay employees. It has proved to be financially and administratively costly for many businesses (large and small). Moreover, despite HMRC’s best endeavours many, predominantly smaller, businesses were ill prepared and as a consequence bore even greater compliance costs. HMRC responded to external pressure by easing their strict rules for those businesses with under 50 employees allowing them to submit monthly reporting records. At this moment in time this “easement” will only be maintained up until April 2014. Just this month HMRC have further announced that micro businesses currently with 9 or fewer employees will see this easement extended to give them more time to adapt to the stringent RTI filing requirements that would otherwise be imposed at the end of the current tax year.  As a consequence they will be allowed to continue to file RTI reports up until the last day in each payroll month until April 2016.

We also are well aware of the outlined proposals to close all of HMRC’s 281 enquiry centres throughout the country reducing the amount of face-to-face support provided in communities. There’s a clear expectation for people and businesses to embrace technology and adapt to meet the changes as a result of this legislative development.

But are business owners and the general public ready for the changes? Do they understand why they are being implemented? And what will happen if they can’t keep up?

Micro businesses deterred by digital tax system 

Independent research conducted on behalf of AAT (Association of Accounting Technicians) of 1000 self-employed and micro businesses with less than 10 employees, showed that the majority are feeling the effects of a more digital based tax system. In particular, 39 per cent feel excluded and lack the resource and understanding to keep up, and just under one third (29 per cent) have begun using third party accountancy support to cope.

Small and medium sized businesses…[Read the full article in our December 2013 Edition]

 About the Author

Adam Harper has been Director of Professional Development at AAT since February 2005. His main responsibilities are to oversee the development of services and support for members; to maintain the quality and status of AAT membership; and to represent views of the membership working in/and on behalf of UK business.



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