By May 26, 2016 Read More →

Quarterly returns for small business?

Quarterly returnsHave you heard about the government plans to get SMEs to submit their tax returns four times a year?

In today’s sponsored post Braant Accounting present the pros and cons:

By 2020, if current plans go ahead, all small businesses will have to submit quarterly returns.

At the time of writing, despite a petition with almost 114,000 signatures and the resulting parliamentary debate, the new regime is still in the pipeline. Some businesses will be required to conform to the new rules by 2018, with the full rollout by 2020.

To say this has caused controversy, argument, division and concern in business communities is an understatement. We don’t like change, especially change to an established way of business life that has unforeseen consequences and could mean tons more work and loads more expense.

What the government says about quarterly returns:

According to the government, tax reporting will become simpler and faster:

Tax will be simplified.The government claims quarterly returns mean there will less of a reporting burden on taxpayers. They’ll achieve this by consulting with third parties such as banks, employers, building societies and other government departments so taxpayers won’t have to repeatedly provide information HMRC can get elsewhere.

Tax will be in one place. All taxpayers will have a digital account, making it possible to see their complete financial picture in one place. They say it will be like online banking. Also, taxpayers will be able to balance over- and under payments against each other.

Tax will be digital for individuals and businesses. The self-employed, landlords, and employed people with a secondary income above £10,000 including pensions, will update HMRC at least quarterly. The idea is that businesses will no longer have to wait till the end of the tax year to find out what their tax liability is.

For individuals, the digital tax account will give a personal view of tax affairs. The plan is to offer advice via web chat or secure messaging, so individuals can communicate with HMRC at their own convenience.

The government says that the changes won’t mean submitting four tax returns a year. All it will entail is checking the information that record keeping software or apps generate.

What worries business owners:

Concerns over the quarterly returns plans are rife. One of the major ones is the increased burden of having to update official records every few months.

Many very small businesses operate on a shoestring but, under the new rules, everyone will have to keep digital records, which probably means paying for digital accounting software, which can be expensive. The prediction is that the cost of doing business in the UK will rise significantly.

Despite government assurances that the new system will require no more than ‘simple updating’, many question how easy this would be in practice. It’s neither particularly fast nor easy to put together a full set of business accounts, so there’s a natural concern that quarterly returns will introduce another level of bureaucracy and complexity.

What happens to people who currently keep manual records? HMRC seems to assume that everyone is up to speed with digital capabilities, but it’s not true. Many still use traditional bookkeeping methods, and they could need support to make the transfer to online accounting. Will that support be there? At what level, and how much, is still unclear.

Running along similar lines is a concern regarding access to superfast broadband, which not everyone has. Trying to keep records online, update everything, and submit to a busy HMRC website on a slow internet connection could be disastrous.

Business owners also worry that a totally digital system will introduce new possibilities for reporting errors.

With the Federation of Small Businesses (FSB) and the Administrative Burdens Advisory Board (ABAB) echoing the concerns of companies across the UK, the call is for the government to slow down and think again rather than rushing through mandatory quarterly returns.

What do you think? Do compulsory quarterly, digital tax returns sound like a good thing, or is the government rushing business owners into a world of confusion, expense, and headache?

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Braant Accounting offer bookkeeping and accounting services and preparation of company accounts across London and the UK.

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2 Comments on "Quarterly returns for small business?"

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  1. heather yeoman says:

    interesting so the time you would allocate for selling buying promoting will be overshadowed by online paper work which means you earn less and pay less tax big smiley face aalso it will put people off setting up buissness those special need schools oxford and cambridge and oxford have a lot to answer for