UK GOVERNMENT RESPONDS TO DIGITAL TAX ACCOUNT PETITION

Over 100,000 people have signed a petition against the British government’s new tax plans. These would obligate self-employed people and small to medium sized enterprises (SMEs) to update their tax records digitally “at least quarterly.” Verastar has learned that the government has responded to the petition, defending its digital tax account plans.

Business concerns

The Low Incomes Tax Reform Group, a UK support group for the self-employed, has spoken out against the government’s plans. They said: “Companies which do not already use record-keeping software, or are using software that will be incompatible with HMRC’s [HM Revenue & Customs] digital accounts, will have to spend a great deal of time transposing their business records onto new systems to satisfy HMRC – time spent in an activity of little or no value to them or their customers.”

They added: “It is very harsh that the smallest businesses with the lowest profit margins may be required to undertake significant investment and training in computer technology simply in order to comply with HMRC’s reporting requirements, and for no other purpose… HMRC should develop software that is so much more convenient and easier to operate than any alternative that people will naturally choose to use it, as is already the case with online self-assessment filing.”

Government response

The government has responded to critics of its digital tax account plans, saying the new system will be an improvement. Under the current system. Whitehall argued, “many taxpayers are caught out by their tax bill when it finally arrives.” They noted that “making tax digital will not mean ‘four tax returns a year’. Quarterly updates will largely be a matter of checking data generated from record keeping software or apps and clicking ‘send’.”

The government suggested that the plan to impose quarterly returns in 2018 will be “fundamentally different” from the “complexity” of completing an annual tax returns in three key ways:

  • It will impose different sanctions for lateness or inaccuracies on returns than those utilised by HMRC’s current tax returns system.
  • It will allow digital account holders to receive a “developing in-year picture of their tax position.” This will provide them with greater certainty about what they owe”,” allowing small businesses to plan how to meet tax obligations.
  • It will be “much quicker” than the current system, as “existing digital business records” will be used to generate data for companies which hold digital tax accounts. Therefore, “in most cases, little or no further entry” of data will be required.

Whitehall will ensure that SMEs can utilise software or apps to “connect securely” to their digital tax account. Also, “the government will ensure that free products are available [and] the Gov.UK service will signpost taxpayers to the right product, with clear HMRC guidance about how to choose software. HMRC will ensure support is available for people to get online if they need it. We will also provide alternatives for those who genuinely cannot use digital tools, like telephone filing.”

Verastar

The UK’s business community is concerned that the government’s new digital tax account plans will cost SMEs time and money to implement. Whitehall has responded to these fears, suggesting that when digital tax accounts come into force in 2018 they’ll improve on the current tax system, allowing UK SMEs to streamline their operations.

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