The past year has seen a number of measures from HMRC to encourage greater transparency of UK residents’ onshore and offshore financial arrangements. This trend is a global one and new information exchange agreements and mandates are coming in to effect, increasing Governments data gathering capability and the ability to analyse it with recourse years later. At the heart of this capability is the HMRC’s Making Tax Digital (MTD) project.
Making Tax Digital is an HMRC initiative that will revolutionise the UK tax system and ultimately bring an end to self-assessment.
The primary aim of Making Tax Digital is to make tax administration more effective, efficient, and easier for taxpayers through the implementation of a fully digitalised tax system by 2020, whilst also reducing HMRC’s overheads for managing tax affairs. Noble intentions that I think we can all support.
The changes apply to a wide range of taxpayers, including most businesses, self-employed professionals, and landlords. This ‘new and improved’ tax system will require the majority of business owners to maintain digital records using compatible software.
At present the HMRC collects more data than it can currently hope to analyse, yet more and more information is being requested and reported, both from the UK and from overseas following a raft of international tax agreements being agreed.
By creating algorithms and by using artificial intelligence (AI) the HMRC believes that it will be able to sift through vast amounts of data provided to it and both validate the amount of tax due and identify non-conformity at the same time. It is expected that advances in technology over the coming years will be sufficient to be able to retrospectively recover lost tax from past years given the extended discovery time limits.
With increasing numbers of data scientists being employed by HMRC, and with a digital data academy having been put in place demonstrating HMRC’s future intent, reporting tax should become simpler with far greater transparency of tax due on both UK and overseas assets.
One takeaway when you consider the prospect of AI and the vast quantities of data they are harvesting, it is more important than ever before that all sources of income are accurately declared now. If unsure how to complete your tax return you should seek professional advice.
For assistance in understanding not only your declaration obligations, but ensuring your affairs are set up in the most tax-efficient way, our financial planners have experience in both onshore and international financial planning and we would be happy to help you. Please get in touch and we would be glad to help.