Chartered Tax Advisers & Accountants

My Making Tax Digital Blog, Part VII, will three or four tax payments a year become the norm?

Published On: 15 June 2017
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If you read my last blog, you’ll recall that I was waxing lyrical about the fact that the government, tied to its manifesto commitment not to increase specific taxes, will have to resort to a range of stealth taxes if it wants (as it assuredly must) to increase the overall tax take to fund all its spending plans and pay for Brexit. 

One thing that the government could quite easily be tempted to do is increase the number of tax payments per year to get more money in more quickly.  Although we have been assured by HMRC (aka the government) that this will not happen, would you care to bet against it in the next few years?  By then, Making Tax Digital (MTD) will be in place in and it will be easy simply to make the case for a need for more money (e.g. for the NHS, bearing in mind there will be an election looming by then!) to come in following the quarterly MTD “submissions”.

Look at this from the government’s angle.  They need our money and, to be fair, no reasonable person begrudges paying reasonable taxes to fund the things we need if we wish to be considered a civilised society.  However, reasonable people get very hacked-off if they are asked to change anything once they have got used to it.  That applies to tax as much to moving the desks around in the office.  If you’re self-employed you are used to how things have “aye been”.  Paying tax in arrears made sense because you needed to get all invoicing, costs, etc. in, then get your accounts sorted (thank you the nice people at M&S), and eventually send the money to HMRC.  When this was all done largely on bits of paper it clearly could not be quickly checked and sent off to the taxman.  Spreadsheets helped but while many people are happy to use these to make life easier, you still have to do a lot of work to get them right and, crucially, you can’t link them to your bank account or to HMRC.

Nowadays, technology now makes it far easier to do this and usually the only papers most people need are actual receipts for expenses - and even these can (should you be keen enough) be photographed on your mobile and uploaded into a cloud accounting system.  Cloud accounting also syncs with your bank account and allows you to reconcile money in and out, do VAT returns in a couple of clicks and see at a glance just how your P&L is looking (in my previous corporate life, we employed droves of management accountants to do that sort of thing and could – often fortunately! - only see the P&L once a month).

As the MTD pilot (in which I’m taking part) continues over the course of this year, we’ll start to see how easy it is to keep accounts up-to-date promptly and efficiently.  Consequently, although the government/HMRC are at pains to reassure us that MTD will not lead to quarterly tax payments, the speed at which technology is moving is such that I suspect we’ll see a sort of halfway house proposed.  For example, rather than paying in arrears with an estimated down payment at the six month point of half of the likely bill for the current year, we’ll have to pay three or four months in arrears.

I think we’ll also see more “fairness” arguments from the government, along the lines of “if employees and firms can deal with PAYE then why shouldn’t the self-employed?”  HMRC has made it clear that MTD is about using technology to get more tax gathered more efficiently than is currently the case.  Why else would they do it?  And given that it’s their remit to gather the tax that is owed quickly and efficiently, why would they then not look to increase the frequency and speed with which the self-employed pay their taxes?

Alastair Blair, thePotentMix