It’s fair to say HMRC have had a pretty bad start to the year. Google-gate coincided with the end of the tax year underlining their eye-wateringly low effective tax rate of 3%, while millions of normal taxpayers looked on in disbelief with nothing short of envy, frustration and anger.
The unfairness of it all is made worse by the Chancellor’s proposals to ‘simplify’ tax by making businesses file mini-returns quarterly.
What’s the issue?
So for anyone who’s missed what this is all about – it’s part of the HMRC’s strategy to Make Tax Digital – a revamping and overhaul of the current antiquated system, that’s supposed to take tax reporting and collection into the 21st century. The controversial proposal to make returns quarterly hit the news again this year after it was first mooted at the in the 2015 Spending Review and was discussed in parliament on 25 January after a petition against them got over 107,000 signatures.
Whilst the general idea of updating our antiquated tax system and Making Tax Digital seems sensible and I can see the benefits of encouraging those businesses who are not yet online to go digital, we need to be careful that the changes benefit not just the HMRC but business too.
The furore over the quarterly tax return, as it was dubbed, is a prime example. In a world where we already have excessive red tape, deadlines and requirements for business management processes, to make deadlines quarterly, rather than annually, can only make more work not less.
What they say?
HMRC argued that it was not proposing a quarterly tax return, that the updates would: “reduce the burden and cost to business of keeping their tax affairs up-to-date and make it easier to spot mistakes. Quarterly updates will largely be a matter of checking data generated from record keeping software or apps and clicking ‘send.”
Hmm, I’m not so sure
But I – and over 100,000 others – simply don’t buy this HMRC line that it will be a quick press of a button to essentially download information that already exists. Figures will have to be prepared, mini audits conducted and man hours spent collating this information and reporting it in the required format.
Filing even mini returns or HMRC-worthy financial updates four times a year may be useful for the HMRC and help streamline their operation but it will be more work for small businesses, and especially for those who outsource all their accounting, it will also undoubtedly be more expensive.
At least the HMRC plan on introducing these reforms gradually after lengthy discussions and consultations – and this makes scrutiny even more relevant and important.
The quarterly tax return uproar and the row over Google & pals’ arrangements are vital to hold the government and HMRC to account. We need to make sure that the reforms which arise work for everyone not just ease the Revenue’s workload management or help big business pay less tax.
SMEs need to keep the heat on and make our voices heard.