Come April 2018, the majority of businesses across Lincolnshire will be required to pay their tax digitally, however a new draft legislation published by the government has been condemned by business support organisations as a ‘total fantasy’.
The government announced that it would be modernising the tax system at the March Budget 2015. It is anticipated to save businesses time and money by not having to provide information that the HMRC already has.
However, despite this looking like a good deal to most, there are concerns of the impact on small business due to an ‘unrealistic’ timeframe for the process.
Under the draft legislation, businesses, including everyone who is self employed and those letting out property, would be expected to update HMRC at least quarterly – a big shift in comparison to current regulations.
Michael Ball, Tax Adviser for Lincoln-based Streets Chartered Accountants told Lincolnshire Business: “The largest impact is going to be on those clients who currently keep manual records, only update records sporadically or indeed keep the proverbial shoe box of receipts.
“For these clients it will be a significant change to their record keeping habits and therefore some will undoubtedly find it a challenge.
“However, this should hopefully be a short term problem as they adjust to the new requirements.
“In the long term, they should start to see the benefits of having a better understanding of their business’ financial position in real time, which inevitably enables more informed financial planning and business management.
“As with all changes the key is to plan early – if businesses and landlords feel that they are going to struggle with the changes, then they need to talk to their accountant or tax adviser as soon as possible to discuss how they can best adjust their record keeping to make the transition to quarterly reporting as straight forward as possible.”
The Federation of Small Businesses (FSB) believes that the timescale now set in place by the government is a ‘total fantasy’ and is campaigning to remove businesses with a turnover of less than £83,000 from the scheme.
Mike Cherry, National Chairman for FSB said: “The programme cannot begin before 2020 without causing considerable disruption to economic growth, investment and employment.
“Small businesses were expecting clarity around how to meet their tax obligations from 2018 and they still do not know what they will face.
“Government now needs to take this time to rethink the proposals.
“FSB will also press for implementation in 2020, not next year. As small business owners plan their approach to Brexit, rushing in mandatory quarterly tax reporting is a headache they just don’t need.”