The Government has responded to criticism of changes to the way businesses will provide information to Her Majesty’s Revenue and Customs (HMRC) after a petition attracted more than 100,000 signatures.
Last year’s Autumn Statement contained the possibility that small and medium-sized enterprises (SMEs) and self-employed taxpayers could have to produce quarterly tax returns.
It’s planned that, following a trial period using volunteers and their feedback, quarterly tax returns for some will be introduced in 2018 and phased in fully by 2020.
The announcement came at a time when HMRC begins a transformation to a fully digital tax service.
However, an online petition was drawn up in response last month which has attracted more than 105,000 signatures – more than the number required for Parliament to consider debating a petition.
The petition read: “Scrap plans forcing self employed & small business to do 4 tax returns yearly.”
In response, the Government has moved to try and calm businesses’ fears.
The changes will rely on businesses, self-employed people and landlords using software or apps that connect securely to their digital tax account.
As a result, the Government has now said that it will ensure free software products are available.
“Making Tax Digital will not mean ‘four tax returns a year’,” it said.
“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.
“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.”
Despite those observations, there remains scepticism in some quarters as to how successful the changeover will be.
Paul Brown, tax partner at accountancy firm HURST, said: “HMRC expects these businesses to use software on their computer, tablet or even smartphone, to maintain their accounting records and automatically transmit the required data.
“HMRC seems to be overlooking how potentially complex the tax affairs of even relatively small business can be. Even at its most basic level, the question of whether a particular expense can be offset against a company’s tax bill can be one which exercises the mind of even the most skilled and experienced tax professionals.”
“The heartening thing here is that HMRC does appear to have built in a reasonable lead time to roll out the system, but even then two years does not leave long to develop what is potentially a complex system and make it ‘simple’ for taxpayers.”
