In the Autumn Statement, the chancellor unveiled plans for quarterly tax reporting to HM Revenue & Customs.
Tina Riches, national tax partner at Smith & Williamson, the accountancy and investment management group, says while this 2020 vision may be seen as a much-needed advancement in the ever-evolving digital age, for many businesses initially this will be an extra layer of red tape, potentially requiring assistance four times a year instead of once.
Ms Riches says: “The requirement to update HMRC on a quarterly basis regarding tax affairs is likely to present challenges to complex businesses that may not have sufficient time to consider the tax treatment of their income and expenses in time for the reporting deadlines.
“It will therefore be crucial for HMRC to consult thoroughly on this and for business to fully understand how HMRC intend to use the reported data, especially if disclosures made under the digital system are more than mere ‘reporting on account’ and will be available to support HMRC enquiries into submitted tax returns.
“While HMRC have stated that the changes are intended to ‘reduce errors through record keeping’, it will be interesting to see whether the support that HMRC promise to those who need help using digital technology will be sufficient and appropriate to assist those taxpayers who require it.
“Real time reporting for PAYE is taking some years to fully bed in, so HMRC will need to ensure that businesses are not unfairly penalised if this gets off the ground.”
A consultation on the details of the changes to digital tax reporting is expected in 2016.
Lee Hartley, chief executive of Fairstone Group, says universal online tax accounts will act as a catalyst for more financial planning services and information to be delivered online over the next two to three years.
He says the challenge will be for the sector to respond to this shift.
The chancellor also made changes to eligible investments for venture capital schemes, confirming the excluded activities for VCT, EIS and SEIS.
In his Autumn Statement speech to the House of Commons he said: “The provision of reserve energy generating capacity and the generation of renewable energy benefiting from other government support by community energy organisations will no longer be qualifying activities, from the end of November.”
In addition, these activities will not be eligible for Social Investment Tax Relief when it is enlarged.
The government will exclude all remaining energy generation activities from the schemes from 6 April 2016, as well as from the enlarged Social Investment Tax Relief, and will also introduce increased flexibility for replacement capital within EIS and VCT, subject to state aids approval, as set out in the Finance Bill 2016.
The government vowed to expand support for Social Impact Bonds, investing £105m over the parliament to help deal with issues including homelessness, poor mental health and youth unemployment.