HMRC has announced more detailed plans on how they will move forward with their Making Tax Digital scheme, in response to consultations about their initial proposals. It claims the new measures will help businesses ‘steer clear of errors’. However, both the ACCA (Association of Chartered Certified Accountants) and the FSB (Federation of Small Businesses) are disappointed in HMRC’s approach and its plans.
The Pressures of Quarterly Reporting
Chas Roy-Chowdhury, Head of Tax for the ACCA, agrees that getting tax bills right first time is important, and sees some positives in the announcement.
“‘We are pleased that logistics for business have been taken into account – such as being able to use spread sheets to record receipts and expenditure, and that for those businesses that cannot go digital will not be required to do so.
‘We are also pleased that HMRC has said further consideration is needed by government on initial exemption thresholds and deferring the changes for some small businesses alongside their business costs – such as software.”
However, he’s concerned about the impact of the changes – and the timetable for them.
“Our concerns about this project have always centred on the pressures of quarterly reporting for filers, and the practicalities and cost of doing so,” he commented, echoing other interested parties and professional bodies who believe that while HMRC are promoting quarterly reporting as more convenient and less stressful than a yearly tax return, quarterly reporting will be more burdensome, time-consuming and costly, with small businesses and freelancers requiring the services of accountants more regularly.
“We are disappointed that there is no full- scale deferral especially in the light of Brexit, business uncertainty and the changes ahead – we hope the Government’s final decision will be a wholesale deferral to 2020 so that business can prepare,” said My Roy-Chowdhury. “‘We also believe that SMEs need to be exempt at least to the VAT threshold at £83,000. We look forward to continuing our work with HMRC and ACCA will be giving evidence to future Treasury Select Committee hearings.”
Tax Timetable “Now a Total Fantasy”
The FSB, meanwhile, was a little more unrestrained in its criticism.
Mike Cherry, the FSB’s National Chairman, said: “The timetable laid out by Ministers in Autumn Statement 2015 is now a total fantasy. It is unachievable given the latest delays announced today. The programme cannot begin before 2020 without causing considerable disruption to economic growth, investment and employment.”
The FSB has been critical of much of the detail of the Making Tax Digital Scheme, and the speed with which HMRC intended to deploy it, from the start. Mike Cherry doesn’t believe this latest announcement has allayed the fears of the FSB or its members.
“Today, small businesses were expecting clarity around how to meet their tax obligations from 2018, and they still do not know what they will face,’ he said.
“Government now needs to take this time to rethink the proposals. To make them work, FSB will push for the removal of businesses with turnover of less than £83,000 from the scheme, and for a phased approach that starts initially with the largest firms. We will also press for implementation in 2020, not next year. As small business owners plan their approach to Brexit, rushing in mandatory quarterly tax reporting is a headache they just don’t need.”
“Bringing together a broad alliance across the business community, accountancy and tax bodies. FSB will also be working on this as a priority with the influential cross-party Treasury Select Committee, which has already expressed deep concern about the implementation timetable even before this latest delay.”