Contractors’ Questions: Is HMRC covertly phasing out paper tax returns?

Contractor’s Question: Is HMRC trying to tell us something by turning its back on paper P11Ds? I fear that covertly, the tax office has got underway with the phasing out physical tax forms – which myself and my co-director spouse would actually be very opposed to. It seems like tech for tech’s sake, no?

Expert’s Answer: Despite your reservations, choosing a paper form to fill in your tax return is generally perceived to be a hassle -- both for taxpayers and HMRC’s staff.

The disadvantages of paper tax forms...

You are correct that HMRC has already made the paper tax form process less accessible as taxpayers have to request a form over the phone, which does indeed suggest a move to start phasing out this traditional way to settle up with the taxman.

While you and your co-director may not be totally convinced, taxpayers who use paper returns then face the risk of sending the form by post, relying on it arriving on time, and it not getting lost in transit. With physical tax forms, there is the additional risk of handwritten entries being misread at HMRCs end.

HMRC's disincentives

Another limitation of paper tax returns comes with a shorter filing deadline. Unlike digital submissions, paper tax returns must be filed by October 31st after the relevant tax year. Given the lengthy process of dealing with papers and filling out tax returns, this could mean a very short timeline for many self-employed individuals to get their information in on time.

Like you, those individuals ought to be aware that HMRC is moving towards Making Tax Digital for Income Tax, and although MTD has currently been delayed, HMRC is already implementing more user-friendly digital applications to speed up and simplify the tax return process.

Doing digital the right way

Our view is that if HMRC wishes to incentivise more taxpayers to file digitally prior to MTD, the tax office should make sure its digital replacements are as user-friendly as possible and, in line with your concerns, do not exclude paper tax returnees who may not be digitally-savvy.

Finally some reassurance for you. We think it unlikely that paper tax returns will disappear completely, and instead, similar to the MTD for VAT, that we could expect to see exemptions from filing the documents electronically for those who do not have the ability to do so.

The expert was Joanne Thorne, technical compliance manager at Caroola Accountancy (formerly SJD Accountancy).