Parliamentary tax petition gets 90k business signatories
A PARLIAMENTARY petition against government plans for small businesses and the self employed to move from annual to quarterly digital tax reporting has received almost 90,000 signatures in just seven days.
The change, burried in the detail of the Government’s Autumn Statement, is part of HMRC’s transformation to a fully digital tax service. By 2020, all business taxpayers will provide their tax information to HMRC via their digital tax account.
Paul Brown, tax partner at HURST, said: “It is in the name of simplification, but experience suggests that previous efforts at tax simplification have in fact simply added a greater layer of complexity for the taxpayer.”
The change has not been well received by business owners – who understandably see it as adding to costs and taking up more time.
Paul Johnson, the businessman behind the petition, said: “Each self employed individual and small business will have the added burden of additional red tape, accountancy fees and potential for fines.
“As a small business owner myself I already spend quite some time to get things in order once a year. There will be greater chance of errors as well. At the moment we pay £1,200 a year in accountancy fees this figure will greatly increase.
“The Conservatives are not working for small businesses in bringing such legislation but adding burden.”
Research by business lobby group the Federation of Small Businesses (FSB) shows that its members already spend on average £3,600 completing their tax returns, with many still completing it manually.
Phil McCabe, development manager for the FSB in Merseyside, West Cheshire and Wigan told us that while it welcomes HMRC’s digital transformation, compulsory quarterly online tax reporting is a real concern.
“This is a case of piling on red tape out of step with wider efforts from the government to reduce the regulatory burden and streamline taxation,” he said.
“The UK’s self-employed will particularly struggle with this change. We therefore want to see proper consultation with business groups and professional bodies, a clear statement of benefits to the business community and a package of support to help offset this new burden on business.”
Tax experts suggest the government has another motive for the changes – that it is a means to phase in early payments.
HURST’s Brown said: “It will not be a big surprise if the earlier submission of data is accompanied by the earlier payment of tax – we already know any tax on the sale of residential property will have to be paid within 30 days in a few years’ time, and it’s unlikely to stop at that.
“A cynic like me would suspect that HMRC will… use it to look for gaps and errors in a company accounts that could give them a reason to open an inquiry into the taxpayer’s affairs. HMRC will rarely look a gift horse like this in the mouth.”
Rebecca Durrant, tax partner in the Manchester office of accountancy firm Crowe Clark Whitehill, said: “The proposal means that for the majority of our clients, who pay tax rather than receive repayments, there would be an acceleration of the date of payment of tax – not helpful in cashflow terms.
“By inference, HMRC is indicating that this will be compulsory but it ignores the fact that there are still a large number of small business owners and self employed who do not, or cannot, use online filing.
“Whether this is due to lack of IT skills or lack of trust in online security, it still puts a burden on the taxpayer without offering an alternative means of settling tax or claiming repayments.”
Government figures showing the effect of Autumn Statement policy decisions highlight a yield for “Making Tax Digital: reducing errors through record keeping” of £610m for 2020-21.
A HMRC spokesperson told TheBusinessDesk: “99% of businesses already file their Corporation Tax online and 98% of VAT returns are filed online. The new digital accounts simply integrate the different information businesses provide to HMRC into a simple, streamlined system.
“We are focussed on creating a tax system that is more effective, more efficient and easier for taxpayers.”
HMRC’s outlining document ‘Making tax digital’ sets out how HMRC’s digital future will be achieved by 2020 and can be read here.
The online petition can be viewed and signed here.
Business view
Cheshire-based baby and child swimming business Puddle Ducks was set up when Tracy Townend and Jo Stone – who have corporate backgrounds in engineering and project management – met whilst on maternity leave and the franchise side of the business has grown steadily since its inception in 2007.Puddle D
ucks now teaches more than 16,000 babies and children to swim each week through 34 franchises and is on course to break £1m turnover this year.
The company currently completes its tax returns annually through its accountants.
Jo Stone said: “Whilst we, and our franchisees, use accounting software to keep necessary records, plans and control during the year, it’s only the final accounts at year end that are provided in the format required for the tax office. Typically, this is time consuming.
“Repeating the process quarterly would add no further value to the running of our business but would significantly increase our costs and efforts.”
ucks now teaches more than 16,000 babies and children to swim each week through 34 franchises and is on course to break £1m turnover this year.
