MPs say the UK is not ready for digital tax

During the Chancellor’s 2015 Autumn Statement, the Government announced its plans to reform tax legislation to require small businesses, the self-employed and landlords to update HMRC quarterly, rather than completing an annual tax return. The Government intends for quarterly updates to be initially introduced from 2018 and phased in fully by 2020.

MPs criticised the 2020 target as premature and motivated by cost cutting rather than serving British taxpayers. The Government has said that the digital tax strategy will save £700 million a year.

HMRC has strongly denied the label ‘quarterly tax returns’, characterising them instead as ‘quarterly updates’.

“Businesses will not need to file four tax returns a year. The new digital accounts will integrate all the different information businesses already provide to HMRC into a simple, streamlined system,” said an HMRC spokesperson. “Instead of one big, onerous tax return each year, once a quarter businesses can check that the information they are collecting digitally is correct, and simply click ‘send’ to update HMRC.”

MPs have urged the Government to delay the rollout of Making Tax Digital until all taxpayers are ready. Concerns around complexity of quarterly updates also continue to stall HMRC’s digital plans. “Rather than reducing errors, quarterly reporting could increase the risk of taxpayer errors,” said the Low Incomes Tax Reform Group (LITRG). HMRC disagreed, commenting: “The scope for error will be greatly reduced, meaning fewer businesses face the shock of a bigger tax bill than they expected at the end of the year. Annually £6.5 billion is lost through error. These reforms will improve the quality of record keeping and reduce mistakes,” said the tax authority in a statement.