Quarterly digital tax returns – watch this space!
The then Chancellor, George Osborne, announced in the March 2015 budget a proposal to radically change the tax system away from annual paper-based returns.
This would apply to everyone, both businesses and sole-traders, and require them to submit quarterly tax returns entirely online.
That was the plan and lengthy and comprehensive consultation was promised before the system would be finalised.
Indeed, this comment appears on the HMRC Roadmap website page, last updated on August 15 2016 : “We do not underestimate the scale of these reforms and are introducing them gradually between 2018 and 2020, because we know how important it will be to get them right and to give individuals and businesses time to adapt.” Quite so!
However, since then there have been a number of delays and changes which have made it hard for SMEs in particular to work out just exactly what will be expected of them and when.
In July, following the changes in Government personnel after the EU Referendum, Accountancy Age reported that HMRC had cancelled a Stakeholder Conference planned for July, as well delaying the issuing of consultation documents, of which there are six relevant to different groups of taxpayers.
HMRC also plans to hold regional and online consultations, but as yet there appears to be no detail.
All of this with a consultation period supposed to be completed by 7th November this year.
So what is going on?
Already as a result of feedback, changes have been made to the proposed plan including possibly introducing a threshold of £10,000 annual turnover, below which all unincorporated businesses and landlords will be exempt from keeping digital returns and submitting quarterly updates, deferring the start of Making Tax Digital for some other small businesses, giving them extra time to get used to digital record keeping and quarterly updating, exempting digitally excluded businesses from digital record keeping and quarterly updating and introducing simplifications, for example extending cash basis accounting to more businesses.
Consultation questions have now been published by HMRC, and appear to be comprehensive, asking among other things for comments and information about the likely additional costs they will face in buying software, in training, and in business and advisors’ time.
We would advise SMEs to make themselves aware of the proposals and ideally respond to the consultation if they wish to have some influence over what will be a radical change for many of them bearing in mind that the 7th November deadline has not been extended – as far as we can ascertain!
In due course we will post notes for SMEs to make sure they are prepared but for the moment we don’t yet know what impact the proposals will have. However, SMEs should be aware that if the quarterly filing of accounts as originally proposed is implemented, compliance will involve a significant investment in both time and money.