MPs debate quarterly tax returns for small businesses

Parliament has debated plans to fully digitise the tax-reporting process for small businesses and the self-employed. The debate was triggered by an e-petition titled “Scrap plans forcing self-employed and small business to do four tax returns yearly”, which received more than 100,000 votes of support.

Critics fear that the plans could put extra strain on small businesses. Some of the specific worries were that small businesses would face additional red tape, accountancy fees and the potential for fines or penalties.

There were also fears that, if businesses were required to submit quarterly returns, they might also be asked to make quarterly payments. Companies that currently budget for annual returns and payments could find their cash flow for the year seriously affected however. Depending on how the proposed changes are implemented, it could also mean businesses having to pay two years’ worth of tax liabilities within a single 12-month period. Cash flow issues can cause serious problems for smaller firms and could even lead to a business having to enlist the services of insolvency practitioners if they are unable to manage their situation effectively.

In a response to the petition, the Government said that digitisation would not lead to “four tax returns in a year” and that quarterly updates would largely be a matter of checking data from record-keeping programs and pressing ‘send’. HMRC also said that apps and software required for this process would be available for free.

In the debate David Gauke, Financial Secretary to the Treasury, confirmed that HMRC will get rid of the traditional annual tax return but said that the new process should be quicker and easier than the current system. He confirmed that more software systems would be made available and stressed that there would be substantial consultation this year in advance of the planned 5-year roll-out.

He said the Government would consult on the range of sanctions that were appropriate in a digital tax environment. He also said that no decision had yet been made about changing payment dates.

By Phil Smith

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