One of the questions we’ve often been asked as accountants is will SMEs have to submit quarterly self-assessmentwhen HMRC finally transforms into a fully digital service? Well, until recently the answer to this question was unclear; however, the government has now issued clarification on the matter. It has said that the proposed digital reforms will not result in businesses having to provide the equivalent of four tax returns every year.
The government had previously been reluctant to clarify its position, but after intense lobbying and an online petition against the ‘Making Tax Digital’ proposals, it has now come out and made an official announcement. More than 103,000 signed the petition, titled ‘Scrap plans forcing self- employed and small business to do four tax returns yearly.’ This number triggered an automatic debate in the House of Commons.
What has the government said in response? Well it has gone some way to easing the fears that the new regime would be akin to completing four fullevery quarter: “Quarterly updates will largely be a matter of checking data generated from record keeping software or apps and clicking ‘send’,” it said..
“These reforms will not mean that businesses have to provide the equivalent of four tax returns every year. Updating HMRC through software or apps will deliver a light-touch process, much less burdensome and time-consuming than it is today.”
“In most cases, little or no further entry of information will be needed. It will be much quicker to complete than the current tax return.”
It should be noted, never the less, that any improvements to the system will be reliant on businesses, self-employed professionals and landlords using compatible software and apps that connect directly and securely to their digital tax accounts. However the Government has confirmed it will be making sure free software products are available, making it as easy as possible for taxpayers to keep their financial affairs up-to-date in their digital tax accounts.
So what will this new digital regime look like? What differences will SMEs notice? Well, HMRC has stated that the quarterly updates will be “fundamentally different” to the existing annual self- assessment tax return regime in a number of different ways:
- Businesses will have access to free record keeping software or apps to connect securely to digital tax accounts.
- Quarterly updates will not involve the same complexity as an annual tax return, as the updates will be generated from existing digital business data.
- In-year updates will not be subject to the same sanctions for inaccuracies and late filing as the current annual tax return regime. HMRC will consult later this year on suitable sanctions for digital tax administration.
- Business owner-managers will receive a developing in-year picture of their tax position, providing greater certainty over their tax bill, and reducing the chances of being “caught out” when their tax bill arrives on their doorstep.
For more information on the HMRC’s new quarterly update regime, contact Steven Glicher accountants on 0161 485 8007 or email email@example.com.