The Administrative Burdens Advisory Board (ABAB) has expressed serious concerns about the government’s proposals to introduce quarterly reporting, which equate to tax returns, for UK businesses.
The body, which provides independent oversight of HM Revenue & Customs (HMRC) policies, said the quarterly updates will add an extra burden to businesses due to increased record keeping and compliance costs.
The move to quarterly reporting form part of the government’s plans to make tax digital (MTD) by 2020. The proposals to require tax reports to be filed online will mean most businesses, self-employed people and landlords will have to manage their taxes through digital accounts. These are likely to offer regular payment options and tax breakdowns – and will effectively end the use of traditional paper bookkeeping and template tax return forms.
The MTD plans are still being formulated and HMRC has made very little information publicly available to date.
Despite this lack of data, Milsted Langdon can reveal that HMRC’s plans will be broken down into two main strands: MTD for businesses and MTD for individuals.
Simon Denton, resident Tax Specialist at Milsted Langdon, states: “MTD will change the tax return as we know it. The proposed changes will impact significantly on both business and self-assessment taxpayers, and I’m chasing HMRC to give our clients the lowdown on the potential effects to both.
“We understand that quarterly updates will be capable of alignment for VAT-registered businesses as the government believes the level of reporting will address poor record keeping by SMEs. However, this will impose extra work on any businesses which are not always in a position to undertake it, and the most alarming tax administration reform HMRC will attempt to enforce is to make digital tax reporting quarterly compulsory, rather than discretionary.
Simon Denton continued: “The problem to date is that HMRC’s consultation on implementation of the drive for 100 per cent MTD by 2020 is far more focused on raising awareness of its existence than explaining what exactly will be required of taxpayers.”
The concerns of small business and their representatives appear to be having little effect on HMRC: during the Autumn Statement 2015 the Chancellor reiterated this commitment to quarterly tax reporting and MTD roll out in the next four years with additional confirmation coming in the consultation document Making Tax Digital.
In a speech delivered earlier this year, Financial Secretary to the Treasury David Gauke said that the tax reporting frequency and method reforms would “make it easier for businesses to understand how much tax they owe, which would give them far more certainty over their tax position, and help them budget, invest and grow.”
In response the National Chairman of the Federation of Small Businesses, Mike Cherry, said: “Forcing small firms to pay for expensive digital accounting software so they can 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.”
ABAB has also raised questions about the nature and accessibility of the software required to deliver the move to digital tax accounts.
Milsted Langdon’s expert business team is able to advise businesses of all sizes and types on tax planning and administration issues, including digital tax returns and how the move to standardise this tax return method might affect you. For more information, please contact us.
Link: ABAB report – 2015/16