SMEs won't have to submit quarterly self-assessment tax returns, say Government

The Government has published an official response to an online parliamentary petition against the ‘Making Tax Digital’ proposals, designed to transform HM Revenue and Customs (HMRC) into a fully digital tax service.

More than 103,000 signatures were secured for the petition, titled ‘Scrap plans forcing self employed and small business to do four tax returns yearly’, forcing the subject to be debated in the House of Commons.

The government’s response to the petition eased fears that the new regime would be akin to completing four full self-assessment tax returns every quarter.

“Quarterly updates will largely be a matter of checking data generated from record keeping software or apps and clicking ‘send’,” said the government’s official reply.

“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.”

Improvements to the system will however rely on businesses, self-employed professionals and landlords using compatible software and apps that connect directly and securely to their digital tax accounts.

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.

HMRC has also stated that the quarterly updates will be “fundamentally different” to the existing annual self-assessment tax return regime in four 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 – 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 with 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.

To read more about HMRC’s vision for making tax digital by 2020, click here to read the tax authority’s outlining document.

Last updated: 5th January 2016