Self-employed people could have had access to better support during the pandemic through MTD, says HMRC’s Jim Harra
If the tax watchdog had been able to collect real-time data under its Making Tax Digital (MTD) initiative, more self-employed could have been supported when the pandemic hit, says HMRC’s chief executive.
Jim Harra told the Financial Times that the government could have responded quicker to the needs of the self-employed if it had access to more real-time information on their income, like it has for employees.
The Coronavirus Job Retention Scheme (CJRS), which allowed employers to furlough staff and covered 80 per cent of their wages up to £2,500, was up and running by April 2020 – just four weeks after the first lockdown was announced.
However, the self-employed had to wait another four weeks before the Self-Employment Income Support Scheme (SEISS) was launched. The scheme itself helped around 2.7 million self-employed and small businesses, leaving 3m people working for themselves – whether as sole traders or limited company directors – to fall between the gaps in support.
HMRC couldn’t verify earnings of 3m self-employed
These small business owners weren’t eligible to claim support because they had just started and not filed a tax return or were a director of a limited company. According to Harra, for these people it was difficult for HMRC to verify their earnings.
Harra explained: “Making Tax Digital for self-assessment means that businesses will be providing us with data about their business income much more frequently than they have been in the past, much more in real time.
“And yes, I think if we’d had that data, we could have helped more people.”
MTD for self-assessment would require businesses and individuals to keep a digital record and report their incomes to the tax authority every quarter.
MTD is an opportunity to make ‘tax system easier’
It was rolled out for VAT-registered businesses in April 2019 with all businesses required to sign up by April 2022.
MTD was due to be expanded to include all self-employed people and small businesses submitting a self-assessment tax return in April 2023. However, this has now been pushed back by one year.
It requires taxpayers to provide HMRC with more data, which raised some concerns for many. But, Harra said, this is not an “oh right, they’re [HMRC] going to sort of snoop on me and try and catch me”, it is an opportunity to make the tax system simpler and easier to use.
“I think, what we did during the pandemic on support, we can equally do on the tax system. We can use real-time data to help people as well, make their lives easier.”