Concerns over quarterly tax returns

Friday 8 April 2016

It can be a challenge to keep on top of a company's finances, especially for people who may have just gone limited or small businesses who are still trying to balance a number of different things.

This is one of the reasons why the government's recent proposal to have small businesses to submit quarterly digital tax returns was the cause of concern for many, including many of those who own their own company.

The independent Administrative Burdens Advisory Board (ABAB) has said that introducing such changes to the tax system for both self-employed professionals and small businesses could cause significant problems.

Established in 2006, the ABAB aims to bring a "business perspective" to the tax system and keeps a close watch on actions taken by HMRC. It has been involved in a number of matters involving small businesses such as the Simpler Income Tax measures introduced in 2013's budget.

The body has criticised plans to increase the amount of tax returns that SMEs and self-employed professionals have to make, saying "compulsory digital record keeping and quarterly online updates is not an approach we can endorse".

In its annual report, it said it "significant concerns" that quarterly updates would just increase the amount of work that small businesses have to do. This could not only lead to problems but could also mean the cost of keeping records and compliance also rises.

The Federation of Small Businesses (FSB) has echoed these issues, saying that companies themselves are worried about the proposed changes.

National Chairman of the FSB Mike Cherry said it wouldn't help anyone and would "simply add to the cost of doing business in the UK". 

"These proposals will also substantially increase administrative burdens – particularly for the smallest businesses," Mr Cherry said.

The fact that the proposals had not been well-received indicated that HMRC should "stop, slowdown and think again" before introducing anything, he explained.

However, a statement from the tax office has suggested that most small businesses and self-employed professionals wouldn't need to submit quarterly tax returns online.

It said: "Quarterly updates will largely be a matter of checking data generated from record keeping software or apps and clicking ‘send'"

“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.”

If you have concerns about how often you should be making tax returns, what you should be declaring to HMRC or what counts as a legitimate business expense, professional advice can help ensure you are adhering to the rules.

By Victoria McDonnell

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