Does the government genuinely understand how business works? A whole lot of business leaders think the answer is ‘no’, as one of the most significant regulatory changes to hit Britain looms closer.
The new order involves small businesses having to account for corporation tax quarterly rather than annually. It’s a dramatic change. But the government and HMRC remain sanguine in the face of growing criticism.
Quarterly tax submissions on the way
Right now it’s annual. By 2018 businesses will be asked to submit a tax update at least quarterly. It’s a hugely unpopular move and a 114,000 strong petition has already been raised about the issue, demanding the government scrap their plans. In reality a U-turn looks unlikely and HMRC seems determined to force the proposal through.
The Making Tax Digital report
The government’s Making Tax Digital report reveals their intention to make tax completely digital by 2020, not a bad thing to aim for per se, since it’ll let the revenue collect tax more easily and accurately. Businesses ‘get’ this, as a survey by the Institute of Chartered Accountants in England and Wales discovered. Apparently more than half of UK businesses supported a move towards online tax in general. It’s the impact on SMEs and self-employed people that’s causing concern. Are those concerns valid?
Time to get hooked up with the digital world?
3/5 of SMEs and sole traders currently keep records on paper or don’t use sophisticated software. Some experts are worried the government isn’t taking this into account. On the other hand, the digital world has been with us for some time now. Is there any excuse, these days, for avoiding digital transactions? Or is it anachronistic to persist with old-school systems in our brave new digital world? Should HMRC force the issue and make late adopters go digital? Some say yes.
Plenty of questions remain…
As far as we know so far, businesses will be asked to update HMRC at least quarterly. But exactly what that ‘updating’ will involve remains unclear. Some commentators worry that the change hints at a wider overall long term plan to bring in a sort of PAYE system for small businesses liable for corporation tax.
Will small businesses have to pay their accountants four times a year, and four times as much? Nobody knows. And last but not least, how will such a complex system contribute towards the government’s aim to cut compliance costs by £400m in time for 2020? How, exactly, will complicating an already complex system lead to savings and efficiencies? An interesting question, and one that should be answered sooner rather than later.
In the meantime, keep things tidy
The questions and objections rumble on. Do you need to act yet? It’s probably best to relax for now, since the changes aren’t due for some time and might not happen at all. But it also makes sense to be prepared, at least making yourself familiar – if you aren’t already – with the digital tax world. If you’d like some help getting to grips with it, we can help.