The Low Incomes Tax Reform Group (LITRG) has welcomed the announcement in the Making Tax Digital consultation documents of an exemption for many small businesses from digital record-keeping and quarterly digital reporting to HMRC, and a year’s deferral of those obligations for others.
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The annual tax return is set to disappear by 2020, under new plans from Her Majesty’s Revenue and Customs (HMRC).
He continued: “There is still a lot to design and develop, and it’s important that we do this hand-in-hand with our customers and their representatives; these consultations are the next step in this process”.
The consultation documents make for interesting reading, with some surprising concessions.
The decision to exempt the smallest businesses and landlords from digital record-keeping and quarterly updates follows months of constructive engagement with business and agent groups.
Financial Secretary to the Treasury, Jane Ellison MP, said: “We are committed to a transparent and accessible tax system fit for the digital age, and Making Tax Digital is at the heart of these plans”.
“This means that half of the UK’s 5.4 million small businesses will not be affected by quarterly tax reporting”. It will also explore the possibility of extending the use of third-party information from 2018 onwards, “which will enable us to deliver the end of the tax return by 2020”.
“Exempting those small firms and the self-employed whose primary income from a business is below £10,000 is welcome”.
The cash basis option will only be available to the simplest property businesses, such as individuals and partnerships where all partners are individuals.
According to Frank Haskew, head of the ICAEW tax faculty, said the proposed exemption for businesses with a turnover of less than £10,000 will be of little help to the vast majority of small businesses; most with a turnover below that figure are unlikely to be paying tax anyway.
“FSB will be submitting new evidence into the consultations announced today, and look forward to working with the government and contributing to its Making Tax Digital agenda”.
The reforms are meant to make HMRC one of the most digitally advanced tax administrations in the world by 2020.
As we trawl through the pages looking for further detail, one thing becomes painfully clear.
For its part, the ACCA is warning that the UK’s decision to leave the European Union will have a fundamental impact on the proposals, which it claims has not been addressed. In response, HMRC introduced regulations which allowed Value-Added Tax payers whose human rights would be breached by being forced to use computers and go online to submit telephone or paper returns for Value-Added Tax, and for PAYE purposes those for whom it was not reasonably practicable to use electronic means of reporting were permitted to submit paper returns.
‘What’s worse, the penalty regime will need to recognise and take into account the intentions and technical capabilities of those who’ve failed to report properly.
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Up until 24 June, there was one tiny ray of sunshine in this, a small island of stability to which taxpayers and their advisers could cling. But in granting exemptions in individual cases, HMRC must avoid an over-selective approach to identifying those who genuinely can not use computers or lack access to the internet and must respect the rule of law, the tax campaign group added. The Brexit vote throws all of this into confusion.
