HMRC want real time taxes

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HMRC calls for input on real-time taxesPhilip McNeill, head of taxation (tax practice and owner managed business taxes) at ICAS, considers the challenges and advantages of paying tax closer to real-time. This comes following a recent call for evidence from HMRC entitled Timely payment. While HMRC’s call for input has a special focus on trading and property income for income tax and corporation tax, Mr McNeill says its remit is wide enough to cover areas such as PAYE taxpayers within income tax self-assessment and taxation of capital gains. He says the first big issue revolves around how much tax is owed, with some taxes requiring complex calculations. This presents two options, he argues: “Either the system needs to be simpler, for example tax at a fixed rate, or with flat rate deductions, or tax liabilities need to be estimated.” He goes on to detail ICAS’ view on HMRC’s call for evidence, saying that quarterly payments should not be based on submitted returns; businesses will need time and help to manage cashflow in the transition to real-time payment; and lessons should be learnt from the approach used for 30-day CGT reporting. He adds: “Radical reform of the tax rules should be considered, including consideration of a change to the tax year end, and alignment of tax basis periods across different income streams across income tax.”

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