By Lyndsey Hall
In response to a petition against changes to the tax system, HMRC has stated that the new system will not mean submitting quarterly tax returns.
The petition, started by business owner Paul Johnson, to ‘scrap plans forcing self-employed and small businesses to do 4 tax returns yearly’, has garnered over 106,000 signatures and will be debated by Parliament on 25 January. Watch the debate live here.
The Government’s official response, which all petitions with over 10,000 signatures receive, has been published online and explains that “making Tax Digital will not mean ‘four tax returns a year’.”
Small business owners are understandably concerned that the new tax system will increase their already-heavy burden, but the government has acknowledged these concerns and insists that “quarterly updates will largely be a matter of checking data generated from record keeping software or apps and clicking ‘send’.” In fact, the official response claims that the new process will be “much less burdensome and time-consuming than it is today.”
The new system will involve businesses, self-employed professionals and landlords maintaining their own personal digital tax account via a website or free mobile app. The ‘quarterly updates’ will not involve submitting a full tax return, but will more likely be a quick confirmation that all information is still up-to-date. These in-year updates will not be subject to the same lateness and inaccuracy penalties as the current annual return, but HMRC is yet to decide on an appropriate program of sanctions.
The new digital accounts will allow users to view their tax position at any time, and make payments whenever they choose, rather than waiting for a bill once a year and making a large one-off payment.
The government estimates that “£6.5bn in tax goes unpaid every year because of mistakes made when filling in tax returns. These reforms will make it easier for taxpayers to maintain accurate and up-to-date tax affairs, reducing the scope for error.”
The new system is due to be phased in gradually, with quarterly updates being introduced for some from 2018, and across the board by 2020.
What are your predictions for the new digital tax system? Will it make life easier or harder for small business owners? We’d love to hear your thoughts, leave us a comment or drop us a line on Facebook and Twitter.
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