MPs are set to debate a petition against a UK Government plan to make small businesses and the self-employed file quarterly tax updates – after more than 100,000 people signed up to oppose the move.
Chancellor George Osborne announced the plans in his Autumn Statement, saying: “HMRC is making savings of 18 per cent in its own budget through efficiencies – in the digital age, we don’t need taxpayers to pay for paper processing, or 170 separate tax offices around the country.
“We’re going to build one of the most digitally advanced tax administrations in the world. So that every individual and every small business will have their own digital tax account by the end of the decade, in order to manage their tax online.”
The plan is that instead of the current annual self-assessment system, the self-employed and small businesses will have to file quarterly updates via apps and the HMRC website from 2020.
The plan drew immediate criticism from some in the business sector, with one senior accountant claiming the system could end up being a “dog’s dinner”.
And John Longworth, director-general of the British Chambers of Commerce, told reporters after the Autumn Statement that digital tax accounts “would be great”. However, he said, the “history of Government IT projects is that they end up in chaos.”
He added: “It’s difficult enough for businesses to deal with HMRC as it is without removing any of their face-to-face or telephone contact. Having digital might end up being a complete mess. We’re going to have to watch it very carefully.”
The petition against the move says: “Each self-employed individual and small business will have the added burden of additional red tape, accountancy fees, and potential for fines.”
As I write this, the petition on the UK Government and Parliament website has attracted more than 108,000 signatures. A parliamentary debate can be triggered when the number of signatures on petitions on the site reaches 100,000.
The debate will be held on Monday January 25 at 4.30pm. Anyone wanting to share their views on the Government’s response (printed in full below), what they believe MPs should talk about in the debate, and questions they want the Government to answer can tweet using #HoCPetitions until 10am on Thursday January 21. You can follow the petitions committee on @HoCpetitions or watch the debate on parliamentlive.tv.
You can view the petition here https://petition.parliament.uk/petitions/115895.
The Government’s response to the petition:
“Making Tax Digital will not mean ‘four tax returns a year’. 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.
At the March 2015 Budget the government committed to transform the tax system by introducing simple, secure and personalised digital tax accounts, removing the need for annual tax returns.
At the 2015 Spending Review the government announced it would invest £1.3bn in HMRC to make this vision a reality, transforming HMRC into one of the most digitally advanced tax administrations in the world.
One element of this vision will be asking most businesses, self-employed people and landlords to keep track of their tax affairs digitally and update HMRC at least quarterly via their digital tax account.
Many taxpayers have told HMRC that they want more certainty over their tax bill, and don’t want to wait until the end of the year, or even longer, before knowing where they stand with their taxes.
We also estimate 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.
With businesses keeping track of their tax affairs digitally, quarterly updates will be fundamentally different from filling out an annual tax return in a number of crucial respects:
•Quarterly updates will not involve all the complexity of a full tax return. The updates will be generated from existing digital business records. 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.
•As part of the process the business owner or individual will receive a developing in-year picture of their tax position, helping people have greater certainty about what they owe, allowing them to plan their finances more effectively. This differs from the current system where many taxpayers are caught out by their tax bill when it finally arrives.
•In-year updates will not be subject to the same sanctions for lateness or inaccuracies as apply now to the year-end position. HMRC will consult during 2016 on what sanctions might be appropriate for a more digital tax administration.
The government has already announced that these measures will not apply to individuals in employment or pensioners, unless they have secondary incomes of more than £10,000 per year from self-employment or property.
The reforms will rely on businesses, self-employed people and landlords using software or apps that can connect securely to their digital tax account. The government will ensure that free products are available. The Gov.UK service will signpost taxpayers to the right product, with clear HMRC guidance about how to choose software.
HMRC will ensure support is available for people to get online if they need it. We will also provide alternatives for those who genuinely cannot use digital tools, like telephone filing. This will build on our Needs Extra Support service, which has gone from strength to strength in helping more vulnerable customers.
We’re introducing these reforms gradually. We’ve been in discussion with stakeholders since March 2015 and will be consulting on the details of the proposals throughout 2016.
We will use volunteers to test the new tools and processes and give us feedback. Quarterly updates will be introduced for some from 2018, and will be phased in fully by 2020, giving taxpayers time to adapt.
We want to work with all stakeholders to ensure these changes work for them. For more information about the proposed reforms please search for ‘Making Tax Digital’ on Gov.UK or use the following link: