16 Feb Quarterly tax accounts will cost small traders £280, say HMRC
HM Revenue and Customs (HMRC) has admitted that the UK’s freelance and self-employed community are likely to have to fork out an extra £280 a year on their tax reporting costs in order to keep up with their impending quarterly digital reporting regime.
As part of the UK tax authority’s Making Tax Digital plans, everyone from freelancers and contractors to sole traders and small firms earning over £10,000 will be required to update and submit their income every quarter online.
Bizarrely, HMRC seems to be taking a rather blasé approach to small businesses by claiming that it could be a lot worse after many “claimed Making Tax Digital could cost thousands of pounds per business.”
“The impact assessment outlines that there will be a significantly smaller one-off transitional cost of £280 per business,” an HMRC spokesperson said.
HMRC states that this £280 cost includes everything from the time it takes for small business owners to familiarise themselves with the digital tax account reporting regime, as well as the cost of new digital software or apps to get themselves digital-ready.
The tax authority has announced its intention to beta test the new Making Tax Digital system in April, selecting more than 100 beta testers at random for an early-stage pilot. HMRC predicts more than 400,000 UK taxpayers could have piloted the system by October.
Yet HMRC must continue to cater for those businesses that are somewhat less tech savvy than their counterparts. HMRC has confirmed it will enable taxpayers to continue to submit tax reporting data from spreadsheets, but this must be uploaded via third-party tools that are approved to work with the Making Tax Digital system.
The vast majority of UK accountancy bodies have voiced their displeasure at the very low revenue threshold for Making Tax Digital reporting. The likes of the Association of Chartered Certified Accountants (ACCA), the Chartered Institute of Taxation (CIoT) and the Institute of Chartered Accountants in England and Wales (ICAEW) insist that the threshold should be moved in line with the UK VAT threshold of £83,000.