HMRC quarterly tax returns attacked by watchdog

Independent financial body, The Administrative Burdens Advisory Board (ABAB) has criticised HM Revenue & Customs’ (HMRC) plan to force small businesses to submit quarterly digital tax returns.

The body’s annual report highlighted “significant concerns” that are shared with the Federation of Small Businesses (FSB).  In particular, the report predicted that quarterly updates would be “more burdensome” than the current process, and that the change would increase both record keeping and compliance costs for smaller enterprises.

There are also concerns regarding HMRC’s aim to mandate small businesses to use the as-yet-untested digital tax returns platform.  The report in particular noted reservations about both the appetite amongst small businesses for using the software and the ability of the software itself to deliver HMRC’s vision for small business tax management.

Another major criticism of the report was the manner in which the new policy was announced without consultation or warning in last year’s Autumn Statement.  The ABAB noted that it was “surprised and disappointed” that it had not been consulted on the changes already, given its “close engagement and relationship” with HMRC.

Mike Cherry, chairman, FSB, said: “The writing is on the wall as more and more small businesses are making clear their concerns about this poorly thought out plan.

“Forcing small firms to pay for expensive digital accounting software so they must submit extra tax returns is not going to help anyone. It will simply add to the cost of doing business in the UK. These proposals will also substantially increase administrative burdens – particularly for the smallest businesses.

“When every independent body and expert is lining up to tell you to stop, slowdown and think again, it might be time to take a breather and listen to their concerns.”

The FSB has already requested that its members outline the impact the changes could potentially have on their day-to-day operations to illustrate the possible negative consequences of the new legislation to the Government. 

It’s hoped that if Ministers are made to understand the issues that could arise, quarterly reporting might be introduced purely on a voluntary basis rather than a compulsory one.

Date published 16 May 2016 | Last updated 16 May 2016