Accounting software phasing out end-of-year tax returns

During the last Budget statement, Chancellor George Osborne announced plans to phase out the annual tax return by 2020. Instead HMRC are expecting businesses to provide accounting data directly via their accounting software.

The exact form this data sharing will take has not been revealed, but there are several potential options. HMRC may demand real-time access to finance data (like the RTI requirement for payroll), or weekly digital reports that are uploaded to their systems automatically for instance.

Benefits of access via accounting software

This regular data access will allow HMRC to automate tax return calculations and reduce the administrative burden for business owners. The automated data transfer mechanism is also expected to help Inland Revenue become more efficient, cutting their own running costs and the burden on the British tax payer. As a minimum benefit, SMEs should receive a lot less mail from HMRC.

As well as determining sums payable to the tax man, the new system should also help to reduce instances of tax evasion. With transparent access to data, businesses will find it harder to ‘hide’ their financial transactions, or under-declare their profits, ensuring they end up paying the correct proportion of tax.

Although businesses are currently geared towards a single, annual (or in some cases, twice yearly) payment, the end of the fixed-term tax return could actually help businesses to better manage their tax bills by reducing the amount due at any one time. And if implemented correctly, the new regime should help reduce administrative overheads all round. If you want advice on accounting software to help your business with tax, contact our expert team today.