UK taxpayers can file paper returns, which increases the risk of human error when the returns are processed.
The UK government has tasked HMRC with reducing the cost of tax administration by £400m. The key to this is the introduction of digital tax accounts for businesses, self-employed people and landlords. The digital account will need to be updated quarterly and will presumably be a stepping stone to real time information for businesses and individuals who would normally file tax returns.
HMRC make it clear that people with simple tax affairs will only need to operate a digital account if they have secondary income of £10,000 or more.
At present, HMRC are very paper based so there will need to be a step change within HMRC to reach the intended goal. Individuals with digital accounts will need to ensure that they have broadband access and the necessary hardware and software to keep their accounts up to date. There is a risk that the elderly and people on low incomes may be adversely affected by the introduction of a digital account. The costs of complying could in reality increase for taxpayers while HMRC make significant savings in terms of the manpower and resources required to maintain the current compliance system.
HMRC also need to take into account the fact that limited broadband access in certain geographical areas may restrict people’s ability to access their digital accounts.
In time it is intended that the digital account will lead to real time information (RTI) for UK businesses.