MPs consider scrapping HMRC’s plans for quarterly digital tax filing

This afternoon will see MPs consider a proposal to abandon a key element of HMRC’s strategy for making tax digital, in response to an online petition which has gained 110,000 signatures and so forced a parliamentary debate on its call to scrap the requirement for self employed taxpayers and small businesses to undertake four tax returns a year

E-petition 115895 was created by businessman Paul Johnson after HMRC revealed its plans late last year to give everyone a personal tax account, with the aim that these would be updated with information quarterly.

The petition claimed: ‘George Osborne announced in his Autumn Statement the plan for self-employed and small businesses to have to file four tax returns a year rather than one as currently is done. Each self-employed individual and small business will have the added burden of additional red tape, accountancy fees and potential for fines.

‘As a small business owner myself I already spend quite some time to get things in order once a year. There will be greater chance of errors as well. At the moment we pay £1,200 a year in accountancy fees. This figure will greatly increase. The Conservatives are not working for small businesses in bringing such legislation but adding burden.’

In its response to the petition, the government stated: ‘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”.’

HMRC has said it will ensure that free apps and software products are available to undertake this process, which it describes as ‘secure, light-touch and far less burdensome than the tax returns of today’.

It also says mandatory digital accounts will reduce errors in tax returns, and raise over £600m by 2020/21.

The government has said it will consult widely on the details of these measures in spring 2016, including on whether they should apply to charities, sports clubs and their trading subsidiaries.

However, a number of criticisms have already been raised, while the online petition gathered the 100,000 signatures needed to be considered for a debate in under a month.

Andrew Tyrie, chair of the Treasury select committee, wrote to David Gauke, financial secretary to the Treasury, in early January seeking reassurance on several points, including that businesses will not be compelled to pay tax sooner than currently; businesses will not be required to provide quarterly updates requiring more burdensome record keeping than currently; adequate arrangements will be made for those businesses who do not use computers; and all the details, including the associated penalty regime, will be subject to full consultation prior to any decisions.

Ahead of today’s debate, the petitions committee asked for feedback via Twitter as to what topics should be raised with MPs. The committee received 1,285 tweets from 565 contributors in 24 hours, which can be viewed by searching #HoCpetitions.

The most frequent questions were why big businesses are not also required to meet the new regime, together with concerns over the accountancy costs, the availability of the necessary software, security issues, and the capability of HMRC to implement the changes.

The debate will be led by Conservative MP Oliver Dowden, a member of the petitions committee, and will take place at 4.30pm on 25 January. It will be live on Parliament TV here

The background briefing material is here

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Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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