The government is being urged to delay its proposed ‘fundamental changes’ to the tax regime that will see self-employed people having to file quarterly reports to the taxman.
From 6 April 2023, the UK’s four million-plus self-employed people and businesses will have to report their earnings on a ‘tax year’ rather than ‘current year’ basis. The tax basis period will be altered in the 2022/23 tax year.
But the move, part of HMRC’s Making Tax Digital for Income Tax initiative, has been criticised by major tax and accountancy bodies, who say the changes are “happening too quickly” and want the government to delay implementing the new rules.
Timetable proposed ‘puts the integrity of tax system at risk’
In a letter to the Financial Secretary to the Treasury, Jesse Norman, the bodies said: “We support tax simplification and the modernisation of the tax system through a further move to digital, but sufficient time must be allowed for this to happen at a manageable pace. The timetable being proposed will place enormous pressure on businesses and their advisers as well as on HMRC. Mistakes will be costly and this risks undermining trust in the tax system.
“It is the view of the professional bodies representing a large proportion of the UK tax profession that these reforms are being implemented too quickly. We are greatly concerned that the current timetable puts the integrity of the tax system at risk.”
They said an extensive public education exercise needed to be undertaken, similar to that for the move to self-assessment in the 1990s.
Accounting bodies say changes would ‘put a strain on tax advisors’
They wrote: “Businesses in the UK have risen to the combined challenge of Brexit and the global pandemic and the tax profession continues to support them. At this time, we do not need the added complication of a multiplicity of fundamental changes to the tax rules in consecutive years.”
The signatories represent the ICAEW, the Chartered Institute of Taxation, the Association of Tax Technicians and Scottish accountancy body ICAS.
The bodies said the changes would put a strain on tax advisors, saying when the Treasury’s Making Tax Digital rules for VAT were introduced in 2019 waiting times for HMRC calls more than doubled.
Treasury open to ideas but confident in proposals
However, the Treasury defended the proposals. A spokesperson said: “Simplifying the basis period rules will allow self-employed people to spend less time doing tax admin and will also help reduce errors and mistakes in returns.”
They said the proposals are still open for consultation, including on the timing of the reform and its interaction with other aspects of the tax system.
Source: Accounting Practice