Post-Halloween scare stories – aka, is this 4x4 tax returns really going to cost me nearly three grand each year?
(continuing the diary of a small businessman and his attempts to understand our tax system)…
The mainstream media are now aware that something unpleasant and potentially very scary indeed is going on at HMRC. From the position earlier this year, when only a few accountants were making noises about this (and to their credit M&S was one of that small bunch), we’re now in a position whereby self-employed business people, doctors, dentists, plumbers and even marketing consultants and writers like me, are starting to take notice. However, it seems the majority are still in the dark. More importantly, some details are now emerging which will, I suspect, take the debate/consultation on to the next stage.
I read in the Daily Telegraph (which as a right-wing paper that champions business ought to be on top of this) that “The controversial switch to regular digital tax returns in 2018, announced by the Government last year, is being hastily imposed without any detail about what companies must do, experts told the Treasury Select Committee.”
The Telegraph had already reported in January, via its Financial Pages, its concerns about HMRC’s attempts to create a link to everyone’s bank account. Do you want HMRC to be able to take money out of your account? I certainly don’t, at least not without my permission. The fact is, I don’t actually know whether this is going to happen, whether it’s been binned or, perhaps more likely, quietly shelved for another day?
Irrespective of whether this free pass to your and my bank account will come into being, it now appears we have a figure for the cost of the 4x4 tax returns – I refuse to go along with the HMRC propaganda and call them ‘submissions’ – and it’s, wait for it … £2,770 per annum! This is the figure quoted by Mike Cherry, Head of the Federation of Small Businesses (FSB) and, for avoidance of doubt, it doesn’t include what you are currently paying – it’s an EXTRA £2,770 per annum.
OK, now I’m not an accountant, but based on the Office of National Statistics (ONS) own figure of 4.6 million self-employed, that means an additional £12,742,000,000 per annum. Yes, that’s right, nearly £13 billion pounds every year. However, don’t worry: HMRC in its laughable ‘myth buster document’ says of its Making Tax Digital initiative "These changes will contribute to our target to reduce business burdens by £400m." If the figure quoted by the FSB above is even half what the final costs to businesses are, the numbers still don’t add up. On that basis, this is a bad joke.
To put that figure of £13bn in context, it’s ten times what HMRC is spending on a “technology upgrade” that is intended to narrow the “tax gap” between money owed and the amount actually collected, which totalled £36bn, or 6.5pc of all potential taxes last year. That’s the real (and perfectly understandable and acceptable) reason for the MTD programme. However, I want to know how much of this £36bn comes from the big companies who can use all the dodges in the book (base in Ireland, etc.) to minimise their tax bills and how much comes from the SMEs?
Finally, just to make matters worse, the FSB reckons that three-quarters of small businesses don’t maintain their accounts online at present. Consequently, the major accountancy bodies across the UK are apparently now considering having to employ trainers to help clients with computer skills (something that the smaller accountancy firms will struggle to afford). This is ridiculous!
Last year, there was a petition against these measures, which got 114,000 signatures and was subsequently debated in Parliament in January this year. At that time, the Government said the overhaul should result in less bureaucracy for businesses as the quarterly updates will be less onerous than full tax returns. As an example of the distance between government and governed this takes some beating.
Am I alone in thinking this entire Making Tax Digital exercise is heading the same way as so many previous government IT schemes? More seriously, I can’t afford to pay nearly three grand more every year in fees. Fortunately, as reported on their news pages, Making Tax Digital - Compulsory Change or Pay The Penalty, M&S intends not to charge any more than at present so long as the 4x4 “submissions” are not too onerous. However, I can’t see every accountant being so understanding. The really sad thing is that as we move through the Brexit process, the UK government needs every ounce of business optimism it can get. To that end, during the process of Making Tax Digital how many small businesses – and small accountancy businesses to boot – will go to the wall, with all that implies for the economy as a whole?
Alastair Blair, thePotentMix