Tax Returns Debate: Further Consultation Needed

Martin Reed

Martin Reed

Martin leads the SoA's Communications team. He oversees our strategic communications and campaign-based activities, including PR, social media, events and partnerships.

27 January 2016

On 25 January, following a huge response to a petition, the House of Commons debated plans to introduce quarterly tax ‘updates’ for the self-employed and small businesses.

Changes to tax administration impact on authors and many of you signed the petition and made your concerns known to the Petitions Committee ahead of the debate.

David Gauke, financial secretary to the Treasury, told MPs that the transformation does not mean four tax returns a year and assured them that quarterly updates will not involve the complexity of a full tax return. During the debate there was cross party agreement that going digital is the correct ‘direction of travel’ but several key questions and points of concern were made, including:

  • Will the updates mean that tax is payable on a quarterly basis? Is this a move towards a pay-as-you-earn (PAYE) system?

Gauke stated that ‘No decision has yet been made about changing payment dates. In December, alongside the “Making tax digital” road map, we published a discussion paper on options to simplify the payment of taxes. An initial consultation will take place shortly, with a further, full consultation to take place later this year.’

  • How will the online system be able to cope with the vastly differing types of users’ businesses?
  • What will be the cost in both time and money to users? Won’t this stop them from doing the work which gives them income (on which they are taxed) and driving the economy? Won’t users be picking up the cost of the changes – paying for computers, broadband, increased use of accountants?
  • What sanctions will apply for non-compliance? How flexible will the deadlines be for those balancing their actual work, which may have natural peaks and troughs, with administering updates?

Gauke said that the system is intended to reduce the need for intervention: ‘HMRC is seeking to reduce error at source and so reduce the need for interventions. It is the case that by keeping records in real time instead of processing paperwork at the year end, businesses are less likely to lose receipts or make basic accounting errors.’

  • Are users digital ready? Do they have the skills and sufficient access to computers and broadband? Will the software necessary be free?Gauke pointed to proposals to improve broadband coverage and the existence of several types of free software.
  • Can the HMRC cope? With a poor record on answering calls and plans to cut costs will the support be sufficient?

Gauke highlighted recent improvements in HMRC responsiveness.

  • How can the changes be communicated clearly to the users in order to ensure understanding of what the changes will involve and make sure the system works best for them – reducing the burden and removing the potential for errors?
  • The proposed updates are stated as ‘at least quarterly’? What will the actual frequency be?
  • David Morris, the Government’s self-employment ambassador noted the fear that the updates would amount to ‘a turnover predictor that becomes the new form of VAT.’

Overall there was support for the notion that, rather than put a strict 2020 deadline on the changeover, the emphasis should be on full consultation and testing before roll-out.

We welcome further consideration of the plans. We will respond to the consultation and continue to apply pressure – along with other parties, such as the Association of Authors’ Agents – to ensure authors’ voices are heard and their particular situations taken into account. Please share your thoughts, comments and concerns in the comments below to strengthen our submission.

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