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What HMRC’s digital accounts / quarterly returns mean for SMEs
The UK tax system is anything but straightforward. Indeed, it is often a thorn in the side of many small business owners.
To try and solve the problem, chancellor George Osborne announced last year that the regime would go through a huge revamp to drag it into the 21st Century. The aim of the game is to ‘Make Tax Digital’ and “reduce the burden for taxpayers”.
While this sounds good in principle, HMRC has hardly had a glittering track record when it comes to large-scale IT projects – so it is hardly surprising that the proposals have attracted criticism from small businesses and industry bodies alike.
But what exactly are the changes and how will they affect SMEs? Here’s a quick rundown of the basics:
What is changing?
By the end of the year, every small business and self-employed person will have access to a secure digital tax account. These will be used to register, file and update relevant information, while also for making tax payments to HMRC.
As a business owner, you will be required to update the Revenue on a quarterly basis, rather than at the end of the tax year. This comes into force in April 2018.
HMRC claims the move will help keep you up to date with your financial affairs and avoid a nasty shock when your tax bill arrives. It also states that you will be able to see a “complete financial picture” that will make it seem like you are only paying one single tax, rather than lots of different charges.
How have people reacted?
It’s fair to say that the response to the proposals hasn’t exactly been positive. Indeed, the matter had to be debated in Parliament after a petition against the plans attracted more than 100,000 signatures.
Lobby group the Federation of Small Businesses (FSB) claimed that SMEs would struggle with their new obligations and urged the government to let companies choose the best tax reporting process that suits their own requirements.
Other commentators were worried that the changes required a basic level of technological know-how that some small business owners might not possess.
However, the main criticism was that firms would be burdened by having to complete four tax returns each year. This, it was feared, would distract too much attention away from the important task of growing a company.
The death of the tax return?
HMRC has moved quickly to dispel the rumours of quarterly tax returns, claiming the new process will be streamlined and involve very little work. In fact, the Revenue states that measures could bring about the end of the tax return for millions of people.
According to HMRC, the quarterly updates will be “a matter of checking data generated from record-keeping software or apps and clicking ‘send’. Updating HMRC through software or apps will deliver a light-touch process, much less burdensome than it is today”.
The Revenue also claimed businesses struggling with the digital tools will receive support and that the measures would reduce the amount of mistakes that are made.
While any move to make tax simple should be welcomed, there is a risk that the changes could do more harm than good. There are already too many hoops that business owners need to jump through, so an increase in red tape would be disastrous.
No matter whether they have to fill in quarterly tax returns or not, having to update HMRC every three months is likely to distract business owners away from what they do best. Even with help available, they will still need to be managing online systems – something that some people might find extremely difficult.
The changes will mean that it is now more important than ever for SME owners to seek expert help and guidance when managing their obligations. Having a specialist accountant in their corner allows them to get on with growing their company, safe in the knowledge that everything is being taken care of.
If you’re a small business owner feeling like you could do with a bit more support, why not get in touch with our experts? We’ll be with you all the way through the life-cycle of your company, whenever we’re needed.
To speak to our team, please call 08000 149 597 or email firstname.lastname@example.org.
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