Under government plans, small business owners will have to submit tax returns four times a year
The Treasury select committee has called for an independent review into the impact of quarterly tax reporting for small business owners, a new requirement under the government’s Making Tax Digital plans.
The Administrative Burdens Advisory Board (ABAB), an independent watchdog, will now begin its own impact assessment of quarterly tax reporting before the initiative is rolled-out in April 2018.
The committee decided a fresh review was necessary after separate assessments from the Federation of Small Businesses (FSB) and HMRC remained in conflict.
HMRC’s own impact assessment estimated that the average cost for each business making the switch to Making Tax Digital would be 280 a year until 2020. The FSB’s report stated the average small business owner would incur annual costs of 2, 770 to meet the requirements.
In a statement, committee chair Andrew Tyrie MP confirmed that FSB and HMRC remained a great distance apart regarding the administrative burdens and costs of quarterly tax reporting.
this is the heart of the matter, Tyrie said. He added that a comprehensive pilot? of the switch was necessary to gain an understanding of the real impact on small businesses.
In a statement, FSB national chairman, Mike Cherry, said his organisation was delighted? of the decision to scrutinise HMRC’s judgement on quarterly tax reporting.
comprehensive testing of the programme is critical to minimising the disruption it will cause to small firms at a time when the costs of doing business are at their highest since the beginning of 2014, he added.
Cherry said the tax office had ‘significantly underestimated? the extent of Making Tax Digital costs for the owners of small companies.
unlike the figures posited by HMRC, FSB’s calculations were conducted externally to ensure they are independent, objective and robust. The onus is now on HMRC to explain why their assumptions remain so out of sync with those of leading business and accountancy groups.
In its 2016 annual report, ABAB concluded that compulsory digital record keeping and quarterly online updates is not an approach we can endorse.
At least two and a half million UK businesses are estimated to be affected by Making Tax Digital, and possibly as many as five million by the time it is introduced. The FSB has campaigned strongly to delay the initiative until 2020.
Read on to find out the three simple steps to prepare your small business for digital tax
