'Align digital tax plan waiver with VAT threshold'

An eight-fold rise in the level of income that will exempt one-person businesses from an arduous system of reporting to the taxman ‘at least’ quarterly is being called for.

In fact, the VAT registration threshold of £83,000 should replace the proposed £10,000 exemption from the digital reporting plan, a Chartered Institute of Taxation member poll shows.

But even if the threshold is increased (as 87 % of the polled accountants want), PSCs still won’t get the exemption, as it “will not apply where someone’s income is through their own incorporated business,” HMRC has said.

That means PSCs – referred to as ‘clients’ in the poll – will have to report digitally at least quarterly from April 2018, unless the CIOT’s other call to the government is heeded.

In particular, it wants the start date of the plan (Making Tax Digital) to be put back, as does Treasury Select Committee chair Andrew Tyrie MP, to give taxpayers, their advisers and HMRC more time to prepare.

“The government appears to be forcing the pace in the belief that requiring even very small businesses to 'go digital' in a tight timescale will transform their record keeping and reduce the tax gap”, the institute said.

“Our survey results heighten our fears that this current aggressive approach by HMRC may have the opposite effect, with more haste meaning not just less speed, but maybe even see compliance levels go in the wrong direction.”

So the tax advisers to businesses fear that “whether deliberately or not,” tax rule-breaking could result unless the Revenue “reconsiders the timetable for mandating MTD.”

But the advisers have fears for themselves too. Because of the ambitious commencement date to compulsory digital reporting and record-keeping, 9 in 10 tax practices foresee an added burden on their business.

A third think the ‘vast majority’ of their clients (at least 75%) will need help making the jump from paper accounting to digital; and almost 70% say their help will be needed even if their clients are online already, such as with incoming tasks like e-filing quarterly updates and completing ‘end of year’ activity.