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Is confirming the aggregate final figures the appropriate point of self-assessment?

It is proposed that where information is automatically supplied to Inland Revenue through interaction between Inland Revenue’s and taxpayers’ existing financial systems a return may not be required in the traditional sense. 

However, it is proposed that at a specific point in time a business that automatically supplies information is required to confirm the aggregate final figures. Confirming the aggregate final figures is a proxy for a business having interpreted and applied the law to the facts relating to their own financial affairs, and shows an intention that the amount of tax determined is final. It is at that time that the self-assessment can be treated as triggered, which allows for the remainder of the return process to follow - for example payments becoming due or the application of interest/penalties etc. It also would allow for corrections to the underlying figures where errors in the businesses’ systems exist/occur.

Question

If the supply of regular information is automated through the use of business accounting systems, will the time at which the aggregate final figures are confirmed be an appropriate point of self-assessment?

Comments

Haydn J
Certainly not. A lot of small businesses use their "accounting system" simply as a cashbook to prepare GST returns and provide monthly cashflow reports. Compiling a tax return from these requires a whole series of year-end adjustments- reconciling the bank account, adding receivables and payables, updating closing inventory, depreciating assets, splitting loan payments into interest and principal, reconciling wages, ..... And then checking that the deductions claimed are correct under current tax law at the time. Simply consolidating monthly data entry is not going to achieve any of this. If these adjustments are expected to be done monthly prior to sending the data, the compliance cost will be enormous.

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8 months ago
MichaelAngelo
I share Hayden's concerns that as a small business with limited expertise we might send IRD inconsistent or incorrect information that is difficult to correct later, or spend a lot more time checking everything is correct. For example when I do GST returns I have to go through and check all coding often finding errors that significantly alter obligations, and I try to remember to close off the return period because we often alter or delete invoices. We pay staff by automatic payments so we do not forget, but later may have to make adjustments. Business income varies wildly depending on which day the analysis is done and so needs to be averaged over time and then decisions made as to what is Family Trust or personal income (although I would quite like estimate a personal salary, and voluntarily pay tax on a more as I go basis with an adjustment at the end). ..and of course there are very significant amounts attributed to work in action, stock and other end of year adjustments which only the accountant really understands and we rely heavily on him to make sure we have got everything correct.

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8 months ago
Susan Moyle
I agree with both Hadyn and MichaelAngelo. Not only would small for profit firms have this issue, but all of the non profits I have worked or volunteered in would as well. No this wouldn't affect them in terms of Income Tax (don't pay it) but it would be an issue for PAYE and GST.

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8 months ago
Graham Brown
Two areas of concern with this proposal, the first is automated systems are notorious for errors the second is i do not have the desire or expertise to marry up or reconcile the years data, which is why i employ an accountant. I agree with Haydn there is too much scope for the untrained to get it wrong.

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7 months ago
barb Jeffery
Prefect question as IR56 payee, It is a difficult and wordy question of which maybe an accountant understands But I have no idea what you are asking... This may apply to a small sum of paye for whom all is reliant on cashflow.

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7 months ago
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