Tax experts have given a cautious welcome to plans for digital tax accounts, saying that paper returns must remain an option.
The 2015 Budget on 18 March included plans for what it called “a radical simplification of the tax system” that would see annual tax returns scrapped.
It said that the government would transform the tax system over the lifetime of the next Parliament by introducing digital tax accounts, removing the need for filing yearly returns. The move would enable millions of individuals and businesses to see and manage their tax affairs online.
The Low Incomes Tax Reform Group (LITRG), an initiative of the Charted Institute of Taxation, said that digital accounts could make it easier to comply with tax obligations but that filling in a paper return must always be an option.
LITRG chairman Anthony Thomas said: “Replacing the annual tax return exercise with a digital tax account, which HMRC (HM Revenue & Customs) can ‘pre-populate’ with data they hold about the taxpayer, has the potential to make interacting with them easier and processing taxpayer information cheaper and more efficient.
“But it is essential to retain the ability to choose between digital and more traditional channels of communication, such as paper. For the substantial minority who have never accessed the internet, paper must remain a valid option and not an afterthought. No-one should be forced to file online to comply with their tax obligations.”
Mr Thomas said that a key advantage of a primarily digital system would be the opportunity to get rid of “the complex, unwieldy and disproportionate system of automatic penalties for late return filing, which currently imposes the same penal regime on the confused and error-prone as on the deliberately non-compliant.”