Time to take action against red tape rise

Salon owners and other small businesses are being warned of proposed legislation from HMRC that could hugely add to their red tape workload, and the need to take urgent action if they want to stop it. Do you fancy having to buy new a new phone or computer, and learn how to use new software, just for HMRC’s benefit? Would you volunteer to prepare your accounts four times a year, instead of just once, and then have to do a tax return on top? Do you trust an HMRC computer to get your business’s taxes right without you having to check them? HMRC’s latest initiative, Making Tax Digital (MTD), could involve all of the above becoming a reality for every small business so it’s vital they speak to policy makers before the summer is out. The onward march of technology As anyone who runs a business will have noticed, technology is changing the way that you have to deal with the authorities. There’s VAT and if you’re incorporated, then it’s the same picture for corporation tax returns, and the vast majority of self-assessment income tax returns are filed online these days too. Off the back of the broadly positive experience of implementing RTI for employers with PAYE obligations, HMRC and the government have now announced that they want to go another step further, and as well as records of employment related taxes, they want to get regular updates on tax information for every business in the country. Time is short Compulsory online everything for everyone is the basis of HMRC’s new Making Tax Digital proposal. It started life in March 2015 as “making tax easier” but by December the detail had started to emerge and the name had changed. HMRC and the minister, David Gauke, are keen to stress that they’ll be consulting “in detail” throughout 2016, but the timetable is fixed, and many would say too ambitious. The first businesses are going to be reporting all their tax information to HMRC online, quarterly, in real time from 2018. That means the legislation will have to be in the 2017 Budget, so it’ll need to have been written by the end of 2016 – realistically, well under way by late summer this year. New time consuming obligations We don’t know yet how they’ll be managing the rollout, but it sounds as though it’ll be based purely on size, not sector. Even if you already keep your records online, and up to date, there’s still going to be an additional step. HMRC want you to send them details, probably more or less in line with what you do for VAT (assuming you’re registered), of your headline financial information so that you can be kept up to date with your evolving tax liability. You may think that sounds great, or you may think it sound like a nightmare. The aim is for the reporting to be “light touch” – because every business in the country is expected to keep its records using apps, so that just a single touch of a button will send HMRC what they want out of your records. The reality may be quite different. You will need to start using HMRC approved software for your records. We don’t yet know exactly what that software is going to look like, but we do know it won’t be just an Excel spreadsheet. Somehow, you’ll need to get your figures into a format that HMRC will accept. HMRC seem to be taking the line at the moment that since employers were able to cope with RTI, often by asking agents to file for them, small businesses will be able to cope with this. But the ask is very different this time around. HMRC like to quote proportions and percentages to show how MTD would be good for the majority. But sometimes it’s good to look at raw numbers. For example, there are 490,000 small and micro businesses who don’t communicate with government online now – and would still not do so even if all other options were removed. There’s another 300,000 “can’t but would” – and a further 1.9m who are going to struggle. Failure is not an option – is it? Now none of this means that MTD is destined to fail. But of course there is a risk that it could – and the problem is, if it does then it won’t be in a “government’s systems are broken but it doesn’t affect us directly” sort of way, it’ll be along the lines of “I’ve been given impossible obligations to meet and I’m being penalised for failing to meet them”. And remember, it’s not just HMRC who are involved in implementing this. It’s got to come from parliament, and MPs have already debated it once. The takeaway here is that you need to spend a few minutes to write, or email, a letter to your MP. If you can’t find a template online, contact your local trade body, or ask your accountant about it. Think carefully about what would work for you, and what might even add value to your business – planning, cashflow, even just basic record keeping – and if its best done online, then tell HMRC and your MP how that would work. If it wouldn’t work for you, tell them, now – because you won’t get another chance and you will be left struggling to cope. You can find contact details for your MP at http://www.theyworkforyou.com/mps/. HMRC should be posting details of what’s happening when via https://www.gov.uk/government/publications/making-tax-digital. Remember, if you say or do nothing before the end of the summer you will be left complying with whatever is passed by parliament. Jason Piper Jason Piper is senior manager for Tax and Business Law at the Association of Chartered Certified Accountants.