Cyber taxation

As a tax practitioner, I welcome any steps to simplify tax, whether that is by reducing the volume of legislation that we operate within or making the system more straightforward for all taxpayers.

George Osborne's goal to 'transform the experience of millions of taxpayers' by introducing digital accounts for all taxpayers by 2020, recognises that the current system is flawed and can be much improved. There has been much discussion about changes HMRC needs to make to service taxpayers and I,
like many other tax practitioners, have concerns.

We want access to real time information but not at the cost of increasing red tape and compliance headaches for small businesses and individuals. I fear that the introduction of digital accounts will create more work for practitioners, rather than less.

Any unrepresented taxpayers will need to be tech-savvy (and the elderly will be disadvantaged here) and understand their legal obligations to provide information on a new and more regular basis.

I like the idea of the treasury holding information on a taxpayer in one place. Though it is hardly revolutionary, it is what used to happen in the days when tax inspectors covered all areas of tax. It was possible to have a conversation with your local inspector about any aspect of your tax affairs and gain some clarity.

They would take advice internally on specialist matters, but would be the conduit. That is the face of HMRC
I liked and understood, and if the new system is a digital version of this model, it will be a positive improvement.

As part of the simplification of the tax system, the alignment of payment arrangements for different taxes does make sense. We already know about
the consultation on the abolition of Class 2 NICs and the reform of Class
4 NICs, and welcome that. Merging NIC and income tax is the next logical step, although that will manifest itself
as a controversial increase in income
tax rates.

Simplifying the time lag between earning profits and paying tax on them will put unincorporated businesses on
a par with those on PAYE, and improve the flow of funds into the exchequer.

We may be used to filing our tax returns online, but many taxpayers fear that HMRC pre-populating a return of income and calculating a taxpayer's tax liability based on the information they hold is a recipe for disaster. The old adage of 'garbage in, garbage out' will undoubtedly apply.

Small businesses should be looking at their internal systems and making any necessary investments to bring their bookkeeping and internal reporting mechanisms up to date as a matter of urgency. There also needs to be an improved process and mechanism for checking and rectifying mistakes, which is not too time consuming or difficult. Most people cannot afford to pay now and argue later.

From a practitioner's perspective, there is concern about what role we will play in the future. Headlines suggesting 'the end of the tax return' may seem like good news, but the reality is that many taxpayers will have to update HMRC quarterly with the information that is currently supplied annually.

My expectation is that clients will need us more, and it will create opportunities to get closer to our clients on a real time basis. Whether they will be prepared to pay additional fees will be another hotly debated subject.

The benefit of being closer to our clients by working with them more frequently is that it will enable us to provide advice before they undertake actions, rather than merely advising on the consequences of those actions.

The profession needs to embrace these opportunities to redefine our client relationships. We must ensure that we don't become dinosaurs, unable to deal with a fundamental change in the way we have to work with clients and the tax authorities.

We should be participating in the consultations and informing our clients about the debates and changes suggested by the proposals, as they will impact on us all. 

Lynne Rowland is a private client tax partner at Kingston Smith