Digital tax revolution facing revolt

Opposition mounts to Making Tax Digital

The government’s vision to transform the UK tax system by the end of the decade is not shared by everyone, it would appear. An online petition launched by Paul Johnson, a self-employed businessman, opposing the government’s plans has already been signed by over 100,000 people which will trigger a debate in Parliament.

The petition titled, ‘Scrap plans forcing self-employed and small business to do four tax returns yearly’ states:

“George Osborne announced in his Autumn statement the plan for self-employed and small businesses to have to file four tax returns a year rather than one as currently is done.

Each self-employed individual and small business will have the added burden of additional red tape, accountancy fees and potential for fines. As a small business owner myself I already spend quite some time to get things in order once a year. There will be greater chance of errors as well. At the moment we pay £1200 a year in accountancy fees, this figure will greatly increase. The Conservatives are not working for small businesses in bringing such legislation but adding burden.”

The government has responded by denying that Making Tax Digital will involve completing four tax returns annually. Quarterly updates will largely be a matter of checking data from record keeping software or apps and clicking ‘send’.

With businesses keeping track of their tax affairs digitally, quarterly updates will differ fundamentally from completing an annual tax return in a number of ways:

• Quarterly updates will not involve the same level of complexity as a full tax return. Updates will be generated from existing digital business records. In most cases, little or no further entry of information will be required. It should therefore be much quicker to complete than the current tax return.
• The taxpayer will be able to see a real time picture of their tax position enabling them to budget their finances accordingly and more effectively. This differs from the current system where people are caught unawares by their final tax bill.
• In-year updates will not be subject to the same penalties for lateness or inaccuracies that apply now. HMRC will be consulting during this year as to what sanctions might be appropriate for a more digital tax regime.

By 2020, businesses and individual taxpayers will be able to register, file, pay and update their information at any time of the day or night, and at any point in the year, to suit them. This will also mean no more tax returns.

The reforms will be introduced gradually and there will be consultation on the details of the proposals throughout 2016.

Volunteers will be used to test the new tools and processes, who will then provide HMRC with feedback. Quarterly updates will be introduced for some from 2018 and will be fully phased in by 2020, allowing taxpayers time to adapt.

Anyone wishing to sign the petition can do so by visiting the ‘Scrap plans forcing self employed & small business to do 4 tax returns yearly‘ online.