AYou the taxpayer, rather than the taxman, assess how much tax you owe, so enabling the Revenue to save thousands of jobs and at least pounds 500m a year. The Revenue will, however, work out the amounts payable if you wish.
QWho will it affect?
APotentially about 9 million people will be affected, largely the self- employed and employed people with tax affairs that are more complicated than average - typically those who are higher rate taxpayers or have substantial investment income. Tax experts expect that eventually we will follow the US, where just about everybody has to file a tax return and the Revenue turns its attention to catching tax avoiders and evaders.
QWhen will it be introduced?
AApril 1997, but some of the features involved with the new system already apply to businesses that began trading on or after 6 April 1994 - the year the concept was launched.
QWill a self-employed person pay more in tax?
AYes, if their income is rising from one year to the next. In the 1997-98 financial year, self-employed people will also switch from paying tax on the previous year's income to paying it on the current year's income. This tax hike is a one-off effect of the shift, and the Revenue will give people some relief at the time of the changeover, but it will cause cashflow problems for many small businesses. Small businesses will also face increased regulatory burdens in dealing with the self-assessment regime, which some experts put at more than pounds 100m a year.
QHow will the Treasury gain the pounds 900m?
AThe Treasury estimates that, because self-employed people's earnings are increasing year by year, the effect of switching from taxing the previous year's income to taxing the current year's will boost the Exchequer's revenue by nearly pounds 1bn. In effect, part of people's tax liabilities is being brought forward by a year.
QIs this fair?
AAccountants Ernst & Young recently called for a pause in the process arguing that it is not. It is a subsidy to the Government, they said, effectively bringing forward future tax liabilities. On the other hand, the existing system is something of a perk for the self-employed, because their tax payments are delayed by at least a year, while employees have tax deducted from their earnings as they are paid. Leading article, page 12Reuse content