The HMRC eases the concern of UK businesses this week as digital tax reporting edges closer to implementation.
Following the end of the ‘Making Tax Digital Consultation’ this week, many entities expressed reservations regarding the new system that proposes a minimum of quarterly updates.
George Bull, senior tax partner at RSM said: “This increase in activity has sent many businesses into a tailspin as the new requirement is likely to multiply the time and money spent on compliance.”
However, in a letter to the Financial Times this week, Jim Harra, director general, Customer Strategy and Design at HMRC confirmed that the HMRC ‘will not be asking anyone to file accounts five times a year, nor will we be introducing in-year quarterly payments’.
“We fully recognise that this is a significant change for some businesses, which is why we’re introducing it gradually as well as exempting some of our smallest businesses, but at the heart of digital transformation is a simpler, more efficient tax system that frees business people from red tape and form-filling,” Harra said in the letter.
“This is good news for UK businesses,” Bull said.
Bull added: “The cost of the software, hardware and down-time in learning to operate the new system has been a continuing topic of discussion. And it seems that HMRC has addressed part of this and will now offer free software to businesses with ‘straightforward affairs’.”
Challenges still ahead
However, according to Bull the transition will not be an easy one for UK businesses as “the cost and complexity of the new system could still present a challenge for organisations in the short term as the new system becomes embedded.”
Regarding the in-year updates to HMRC using information collated automatically by the software, “there is no mention of how many ‘updates’ are required,” Bull said.
“Many will eagerly await the consultation findings to provide more guidance on the exact requirements before hitting the panic button.”