Knickers in a twist about quarterly tax reporting?
Tuesday January 26, 2016
... Jane Ollis gets things straightened out
In November of last year HMRC announced plans to create personal and business digital tax accounts and set out a very clear road map for consultation in 2016 and staging between now and 2020 for the roll out and at last bringing us into the 21st digital century.
So why did a petition, signed by 108,000 people, result yesterday in a parliamentary debate on tax reporting and in particular the suggested requirement that businesses will need to submit quarterly tax returns, before the consultation even got going?
The reason could be that businesses feel HMRC have not communicated the plans well and so left room for all sorts of rumours and misinformation to spring up. This is why I’m so pleased to be part of one of HRMC “Making Tax Digital” Working Groups to help get the correct message out there and counter the concerns of business which appear to be three fold:
- The planned changes will place more administrative burden on them
- They will need to pay corporation tax quarterly
- Setting up and running a business will become so complicated that people will be put off from doing so
My response to these concerns is as follows;
Get with it!
HMRC have made it absolutely clear the annual taxation period is here to stay, that going digital is about making life easier and we won’t be filing quarterly tax returns each year. What they are suggesting, given that we are all going to be on-line, is that we update them quarterly, based on the information held in our digital account. Their own survey has suggested that taxpayers want to see where they stand with their taxes and this is a sensible way to go about it.
I can’t see the problem with this. At Rift Accounting, all our clients work on cloud based accounting software that enables us to work with them every month and ensure everything is up to date. Then each quarter we check progress against their goals and plans for the year and talk through any issues in the business and plans for growth. Our clients can see at any point what they are building up in corporation tax & VAT (if applicable), as well as dividends, so they are fully aware of their liabilities and what they need to make provision for.
However, the problem is not all accountants work like this and their clients have to wait until their year- end before they get their annual tax return prepared. No wonder why small businesses are worried about plans to report quarterly with an annual relationship like this, as the leap for them is massive. So for any business out there already cloud accounting, well done! Stick with it and your life’s really not going to be any different.
The only thing that worries me is that these changes could put off entrepreneurs from starting and growing businesses. We need them, their ideas, determination and ability to take risk to create the businesses of tomorrow and a strong economy. We don’t want them worried about accounting requirements – all they need to know is there are accountants of tomorrow already out there, like us, who will make it easy for them and they can concentrate on what they’re great at.