The government has rebuffed a petition demanding they scrap plans to force self-employed and small business to do quarterly reporting under HMRC’s digital strategy.
The new personal tax accounts (PTAs) will require most businesses, self-employed people and landlords to keep track of their tax affairs digitally and update HMRC “at least” quarterly.
“Each self-employed individual and small business will have the added burden of additional red tape, accountancy fees and potential for fines,” wrote the petition’s creator Paul Johnson. “At the moment we pay £1,200 a year in accountancy fees this figure will greatly increase.”
In an official response to the petition, the government denied that Making Tax Digital will mean four tax returns a year, stating that “Quarterly updates will largely be a matter of checking data generated from record keeping software or apps and clicking ‘send’.
“These reforms will not mean that businesses have to provide the equivalent of four tax returns every year. Updating HMRC through software or apps will deliver a light-touch process, much less burdensome and time-consuming than it is today.”
Started on 16 December, the petition has now reached 100,000 signatures, meaning that it will be considered for parliamentary debate.
In his Autumn Statement, the Chancellor said Making Tax Digital will “give individuals and businesses a more convenient real-time view of their tax affairs, providing them with greater certainty about the tax they owe.”
The government estimates that £6.5bn in tax goes unpaid every year because of mistakes made when filling in tax returns. According to the government response, “These reforms will make it easier for taxpayers to maintain accurate and up-to-date tax affairs, reducing the scope for error”.
But Johnson - and his 104, 025 co-signatories (at time of writing) clearly aren’t convinced. “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”, said Johnson. “The Conservatives are not working for small businesses in bringing such legislation but adding burden.”
The government reply stated, however, that sanctions for in-year updates will not be the same as apply now to the year-end position. “HMRC will consult during 2016 on what sanctions might be appropriate for a more digital tax administration.”
“Quarterly updates will not involve all the complexity of a full tax return. The updates will be generated from existing digital business records. In most cases, little or no further entry of information will be needed. It will be much quicker to complete than the current tax return.”
“We will use volunteers to test the new tools and processes and give us feedback. Quarterly updates will be introduced for some from 2018, and will be phased in fully by 2020, giving taxpayers time to adapt.”