1.3 million SMEs now out of scope for quarterly tax reporting
15th August 2016 | News
HM Revenue and Customs (HMRC) hopes by digitalising the UK tax system, paying tax could become much less burdensome with a reduction in red tape for small business owners; as the tax authority announced six consultation documents seeking views on its Making Tax Digital programme.
HMRC hopes that 1.3 million small businesses will be able to benefit from Making Tax Digital, without the need to update HMRC quarterly or keep their records in digital form.
According to HMRC, the benefits of the Making Tax Digital programme include:
- Cash-basis accounting so that thousands more can pay the tax they owe based simply on the difference between money they have taken in and what they have paid out; so tradesmen will pay tax on cash received as opposed to invoices issued.
- Prompts and alerts to help businesses get tax right and provide advice on tax reliefs they might be missing out on.
- Greater certainty over tax bills so businesses don’t have to wait until the end of the year to discover how much tax they owe.
After a considerable period of time spent in constructive engagement with businesses and agent groups, HMRC’s decision to exempt the smallest businesses and landlords from digital record-keeping and quarterly tax updates will be great news for many.
Jane Ellison MP, Financial Secretary to the Treasury, said: “We are committed to a transparent and accessible tax system fit for the digital age, and Making Tax Digital is at the heart of these plans.
“This new system will make the UK’s tax administration more efficient and straightforward, and will offer businesses greater clarity when it comes to paying their tax bills.
“By replacing the annual tax return with simple, digital updates, businesses will be able to concentrate on putting people and profit, not paperwork, first.”
Mike Cherry, national chairman, Federation of Small Businesses (FSB), is delighted that the Government has “listened to FSB representations on behalf of small businesses up and down the UK”.
“Today’s announcement by the Financial Secretary to the Treasury, Jane Ellison MP on quarterly tax reporting proposals is incredibly important.
“Together with the Chief Secretary David Gauke MP, we have seen real dialogue with the business community. The Government has listened to FSB representations on behalf of small businesses up and down the UK.
“Removing small firms and the self-employed with modest turnovers altogether from the proposals will now mean that in addition to the 1.6 million small businesses and landlords that were already excluded, as a result of these changes announced, a further 1.3 million small firms and landlords will no longer be in scope.
“This means that half of the UK’s 5.4 million small businesses will not be affected by quarterly tax reporting. The expansion of cash accounting, a longer lead-in time for implementation and the offer of direct financial assistance will also help.
“FSB will be submitting new evidence into the consultations announced today, and look forward to working with the Government and contributing to its Making Tax Digital agenda.”