HMRC re-thinks digital tax returns for small businesses

tax inspector

Small businesses have been exempted from proposals for tax returns to be filed digitally four times a year. The government has also delayed its proposed implementation for larger firms.

The move follows a 2016 consultation process, during which the NFRN called for the process to be voluntary, rather than mandatory, and only applicable to businesses with an income threshold above £85,000 – the current threshold for VAT – which is the current exemption.

In addition, the NFRN called for greater communication and guidance for small businesses, which could be less digitally able, along with additional support from accountants and tax agents and from HMRC to make available software and training for small businesses.

Last week, the Treasury revealed exemptions to the proposals for the smallest businesses and delays to the timetable to allow more time for other companies to plan for the overhaul. This follows widespread concern voiced about the initial timetable, with the House of Lords’ Economic Affairs Committee saying the previous timetable for implantation of making tax digital was “rushed” and that many small businesses were not ready to cope with the additional administrative and financial demands of digital taxation and quarterly reporting.

NFRN Chief Executive Paul Baxter commented: “Since the plans were first outlined the NFRN and our members have been very vocal and at every opportunity we have put forward our concerns about the full impact digital returns could have for small independent retailers.

“We have always maintained that any such process should be voluntary rather than mandatory and only applicable to an income threshold above £85,000. We are pleased that the government has sat up, listened to our concerns and, more importantly, taken note of them.

“For small independent retailers finding time to manage all the costs associated with their businesses is already time consuming and challenging and this would have been an added and unnecessary burden.”