Petition launched to scrap digital tax accounts
The taxman has made the case for digital accounts for every small business, in the very same week that a petition signed by tens of thousands of people launched to stop them going ahead.
David Gauke, financial secretary to the Treasury, last week published ‘Making Tax Digital,’ an outline of the “vision” for an IT-led “transformation” of HM Revenue & Customs by 2020.
Under the plan, every individual including landlords, the self-employed and small business owners must keep track of their tax affairs digitally by updating their accounts “at least quarterly.”
Since George Osborne, the chancellor, used his Autumn Statement 2015 to unveil the plan – due to generate an extra £610m for HMRC, reactions from affected parties have been mostly critical.
Charity LITRG says it will add to traders’ workloads; Smith & Williamson fears the data may be used for HMRC enquiries and Blick Rothenberg says it may be a prelude to accelerating tax payments.
FreeAgent, an accounting specialist for one-man bands, is more supportive, saying tax administration is “overdue” for modernisation, as is the hoped-for by-product of a “more efficient, streamlined HMRC”.
Speaking ahead of a January 2016 consultation on the accounts, the Treasury’s Mr Gauke said: “Taxpayers shouldn’t have to give HMRC information that it already has, or should be able to get from elsewhere.”
He also said: “Better data means fewer mistakes, fewer delays, and a better outcome for all parties…updating HMRC directly in this way will be secure, light-touch and far less burdensome than the tax returns of today.”
Moreover, the online accounts actually mark “the end of the tax return,” said Mr Gauke, and having to update them at least quarterly “is not going to feel like doing four tax returns a year.”
His reassurances have failed to convince more than 76,000 people who, at the time of writing, have signed a petition stating: “Scrap [the] plans forcing self employed & small business to do four tax returns”.
The petition adds: “Each self employed individual and small business will have the added burden of additional red tape, accountancy fees and potential for fines. The conservatives [sic] are not working for small businesses in brining [sic] such legislation but adding burden.”
Roy Maugham, tax partner at UHY Hacker Young, agrees. “These plans signify a more intensive and intrusive method of data collection from HMRC,” he said.
“Small and medium-sized enterprises will be required to spend time that they don’t have on tax reporting, impacting on their efficiency. [And] the data gathered online is likely to lead much more quickly into HMRC launching tax enquiries into SMEs and sole traders.”
Other accountants say that individuals with complex tax affairs will be the hardest hit, which will make fees for professional guidance a much more likely prospect.
Paul Johnson, the self-employed businessman who launched the petition, said: “As a small business owner myself I already spend quite some time to get things in order…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.”
Mr Gauke would likely disagree, as he says he expects “these reforms to ease the admin burdens on businesses and to help them plan their cash flow more easily”.
But quite apart from the self-employed and small business owners, it is actually the Revenue which might not be able to cope, according to James Moore, a business columnist for The Independent newspaper.
“To listen to George Osborne, by 2020 HM Revenue & Customs will have been transformed into a digital tax titan, an example for the world to follow. That’s right, the same HMRC that can’t even answer its phone calls.”
Mr Moore also wrote: “[The chancellor has] sought to make HMRC’s life easier in some respects by (again) making us taxpayers do its work by…getting small businesses and the self-employed to file returns online every quarter.”