14th January 2020
In recent years we have had numerous legislative changes around tax reporting, beginning with RTI (Real Time Information) on payroll and then more recently MTD (Making Tax Digital) for VAT.
These have been introduced gradually, marking a creeping change to an automated reporting system between businesses and HMRC. The long-term ambition of these measures is a fully automated real time tax reporting system which could ultimately mark the end of the tax return for both individuals and companies – although many question the deliverability of this utopian wish.
Like all gradual change, the impact is not always immediately obvious and in the case of changes to tax legislation it can feel like change for change sake or simply an administrative burden. But after several years, the effect of the increased automation is starting to be seen and felt and some of the positives are beginning to present themselves.
By reporting tax in real time, either as a business or for the individual, HMRC has a far more up to date picture should you need to raise a query. Acting as I do, as the HMRC agent for many clients, I am starting to see the benefit this added visibility can bring. On several occasions this year, I have had to contact HMRC on behalf of clients to discuss personal and corporate tax matters and I have been pleasantly surprised by the effectiveness of the call in resolving the issue and the speed in which the update, resolution or in some cases repayment has been completed.
Maintaining a virtually live picture of a tax account also allows HMRC a degree more flexibility in collecting monies owed. Their systems can identify and track patterns and trends such as personal income and VAT quarters. The result of this knowledge has, in two cases this year, allowed me to agree extended payment terms for my clients on abnormal tax bills, because HMRC can see a history and make an informed decision about the client’s ability to repay. That said, RTI and MTD can also help reduce the risk of big, unexpected bills because both sides have increased awareness of the tax account at any point in time and can intervene as necessary.
So whilst I empathise with many businesses that have had to invest in new software in order to comply, and may have even bemoaned the changes myself at various times, I can now say, from experience that it appears to have been worth it as it has made an improvement when compared to the previous system. Whether we will ever get to that utopian land only time can tell, but for now I will happily take the little wins as and when they come.