Cover firms' bills for quarterly tax reporting, HMRC told

Advisers to small companies will be examining tomorrow’s Autumn Statement 2016 in the hope that it contains a reprieve from ‘Making Tax Digital.’

The examination is likely in light of growing concerns that the costs to both unincorporated and incorporated businesses of putting ‘MTD’ in place will be prohibitive.

HM Revenue & Customs tried to head off the concerns in a letter to the Financial Times, by saying it is considering the provision of additional assistance with transitional costs.

But since the letter by HMRC’s Jim Harra, a tax body appears to be pushing the government to do more -- “bear the costs” entirely that traders will incur if, as proposed, MTD is compulsory.

In fact, because the plan to make most small businesses file a tax report online "at least quarterly" is mandatory, “whatever amount of financial support” taxpayers need must be invested, says the Association of Taxation Technicians.

“If quarterly digital reporting were not being introduced on a mandatory basis then there might be the possibility of having a discussion about a reasonable level of financial support,” says ATT’s Yvette Nunn.

“However, where it is effectively being forced upon everyone, we don’t think there is a reasonable level…and if the government is unable to invest to that extent [to get everyone on board] then it really does need to rethink the mandatory aspect of the MTD proposals.”

Emily Coltman, a specialist in independent workers' tax affairs, agrees that more should be done to help micro-businesses make the transition to the digital tax system.

“Rather than facing the same deadline as larger companies”, she says, “smaller businesses should be given additional time to prepare”.

In addition, all unincorporated businesses making less than £83,000 -- the VAT threshold -- should receive an extra year’s grace before they have to comply, says FreeAgent, where Coltman is chief accountant.

The firm said: “[We have] also recommended increasing the turnover threshold for the cash-basis reporting scheme to £166,000 -- double the VAT threshold -- to make self-assessment easier for more UK businesses.”