Contractors face £280 bill to make their tax digital
Contractors and droves of other professionals who work for themselves face costs averaging £280 each when they put in place their ‘at least’ quarterly digital tax account, HMRC admits.
But rather than sounding apologetic at this hefty cost to implement Making Tax Digital (the name of the initiative behind the accounts), tax staff hinted some people would feel relieved.
“Some respondents claimed Making Tax Digital could cost thousands of pounds per business,” HMRC said. “The impact assessment outlines that there will be a significantly smaller one-off transitional cost of £280 per business”.
The almost £300 charge is said to arise from four things -- the time traders will have to spend familiarising themselves with new digital tools and quarterly submissions; the purchase of new apps or software upgrades; potentially new hardware (for some) and “additional accountancy costs,” HMRC said.
Fortunately for those affected (all small traders with over £10,000 in turnover, landlords and the self-employed), the Revenue followed up by saying that there would also be “annual savings”.
However these saving will be only “small,” and the £280 is only an average figure, per self-employed business over the period 2017 to 2018 to 2020 to 2021.
But from the latter date, compliance costs for those affected are projected to decrease, as will uncertainty about their tax and financial position, adds a new ‘MTD’ impact assessment.
The tax authority added that, having listened to concerns from the business community, spreadsheets will be able to continue to be used for record-keeping, albeit with a proviso.
Specifically, the self-employed “must ensure that their spreadsheet meets the necessary requirements of Making Tax Digital for Business - this is likely to involve combining the spreadsheet with software.”
Another issue raised by enterprise during the six MTD consultations has resulted in the Revenue agreeing to a 12-month delay before ‘late submission’ penalties bite.
It will also grant a deferral to large partnerships and an exemption for charities.
As to those who still stand to be affected -- such as the vast majority of incorporated and unincorporated businesses (except if their revenue is under £10,000), they will be able to help influence the type of penalties that will eventually be imposed on them.
In particular, a consultation will be launched on the specific fines that should be applied for lateness, with the focus due to be on penalty interest, as this was the type of charge that affected taxpayers said they would prefer.