Having just got back from Xerocon I wanted to reflect on the excursion and, not only was it a great experience (it has been affectionately called Glastonbury for accountants), it was also very informative. Along with all the Xero integration apps (look out for an article coming soon explaining how Pleo is going to save us hours with their new invoicing feature) there was also a fascinating update from the Director General of Digital Transformation for HMRC, Joanna Rowland. She discussed the future landscape for HMRC over the next 10 years and how this likely to affect our clients and our firm.
This centred on the 10 year digital strategy bringing HMRC in line with the other economies in the world. This digital strategy started with the introduction of MTD for VAT back in 2017 and although it continues with MTD ITSA being mandated in April 2024 this is not by any means the end of the story. The upcoming digital strategy includes:
- MTD ITSA (Making Tax Digital for Income Tax and Self Assessment)
- Single Customer Records (by the Office of Tax Simplification)
- And Corporation Tax being digitalised in the longer term in 5-6 years
The single customer record development will mean there will be one customer account with all tax affairs in one place with all the background records joined up. This will also mean that businesses and business owners will be linked, Joanna stressed this is key to provide a more seamless service.
With just 20 months until MTD ITSA, Joanna was asked several questions asking for details on how it will be implemented and how it will affect us. The key points are as follows:
Will I have to file quarterly returns?
No, this message has been ‘lost along the way’ and although there will be quarterly submissions to give an idea of income and spend, full returns will remain annual. There are no plans to mandate customers to pay quarterly.
How are HMRC managing the risk of fraud?
The government has a great record of preventing fraud and there will always be a fraud risk with both paper and digital submissions. HMRC have teamed up with the National Crime Agency and have been collaborating with the compatible software to ensure that they meet security standards.
Will the tax year end be changing from 5th April?
In HMRC’s published simplification review there was a case study to look into this (turns out the tax year has been this way since the year 1800), and not only is HMRC very cautious around changing too much at once, there would be significant transactional costs of ‘adopting a more rational tax year’. A link to the report can be found here: https://www.gov.uk/government/publications/ots-review-of-tax-simplification/review-of-simplification-approach-and-interpretation
So for a final key message, Joanna was keen to encourage both clients and accountants to be open minded to progress. HMRC is on a ‘change curve’ and doesn’t want to be seen as an island but rather wants to work with software providers, accountants and clients to make filing taxes smoother and easier for all.
Please get in touch with me if you want to know more about anything mentioned in this article.
Catherine Shore, Accounts Senior