CRITICS of HMRC’s ‘Making Tax Digital’ initiative have slated the taxman’s plans for a quarterly tax filing system, with one business group claiming that the plans will “substantially increase administrative burdens” for the smallest of companies.
This news comes just days after HMRC rolled out digital tax accounts for every individual and small business owner in the UK.
‘We are disappointed with the announcement’
The Administrative Burdens Advisory Board (ABAB), a group that advises HMRC on how it can help small businesses, has voiced its concerns towards the new digital tax system – including mandatory quarterly updates.
In its annual report, the ABAB said: “Whilst we recognise and are supportive of the need to move to digital and the potential this brings, we are disappointed with the announcement to mandate digital record keeping and quarterly online reporting for even the smallest businesses as part of Making Tax Digital for Business.”
The business group added that small companies, which according to the Federation of Small Businesses (FSB) accounts for 99.3% of all private sector business, will struggle with keeping digital records as they may be more burdensome than current record keeping and compliance costs.
The FSB also weighed in on the subject, with national chairman Mike Cherry believing that the move will force small business owners into paying for costly accounting tools.
“Forcing small firms to pay for expensive digital accounting software so they must submit extra tax returns is not going to help anyone. It will simply add to the cost of doing business in the UK. These proposals will also substantially increase administrative burdens – particularly for the smallest businesses,” said Cherry.
Reduced burden for SMEs
This is not the first time the taxman has received criticism over its plans to transform HMRC into one of the world’s most digitally advanced tax administrations.
In January HMRC and the Treasury strongly denied that the plans would force SME owners into submitting quarterly tax returns, after an online petition sparked fears that it could be a possibility. Financial secretary to the Treasury David Gauke later responded to the petition, repeating that HMRC’s plans will not mean four tax returns a year.
In March, chairman of the Treasury Committee Andrew Tyrie published his correspondence with Gauke over the digital tax plans, noting that he “finds it hard to see” how digital tax accounts will reduce the administrative cost to businesses by £400m.
A spokesperson from HMRC said: “We are focused on creating a tax system that is more effective, more efficient and easier for taxpayers and we will work closely with stakeholders to address their concerns. 99% of businesses already file their corporation tax online and 98% of VAT returns are filed online.
“The new digital accounts, which are not being introduced until 2018, will simply integrate the different information businesses already provide to HMRC into a simpler, streamlined system. This will reduce the burden of updating HMRC for small businesses.”
Colin responds to the news that four in ten accountants are worried that technology and automation will make their jobs obsolete in the future
Crowe Clark Whitehill , the top 20 accountancy firm, has announced the promotion of Chris Mould to partner
Bronwyn Williamson, Managing Director of Adams Digital Marketing outlines the top five points to consider when thinking about improving or re-developing your website
The latest opinions from Accountancy Age on Making Tax Digital, and outline plans to evolve the UK's corporate governance regime