More than 100,000 small firms demand rethink on HMRC tax proposal

More than 100,000 small business owners and self-employed workers have joined forces to fight a Government proposal that would force them to file tax returns four times a year instead of annually, reports The Telegraph.

Last week, The Telegraph revealed that complying with the new rules would cost these companies and individuals between 20pc and 150pc more in accountants’ fees, as well as heaping more red tape onto the nation’s most vulnerable firms.

An online petition created by small business owner Paul Johnson on the Government’s own portal on December 16 has been shared thousands of times on social media, and on Sunday, the petition passed 100,000 signatures, the point at which the Parliament is expected to debate the issue.

“The Conservatives are not working for small businesses in bringing such legislation but adding burden,” Mr Johnson said. “Each self-employed individual and small business will have the added burden of additional red tape, accountancy fees and potential for fines.”

The number of signatories is still rising fast, topping 103,000 on Monday.

The Government has 18 days to respond officially to the petition but a spokesman for Her Majesty’s Revenue & Customs (HMRC) issued a rebuttal today, claiming that the impact of the change had been over-exaggerated.

“These reforms will not mean that businesses have to provide the equivalent of four tax returns every year,” HMRC said. “Updating HMRC through software or apps will deliver a light-touch process, much less burdensome and time-consuming than it is today.

“Quarterly updates will not involve all the complexity of a full tax return. The updates will be generated from existing digital business records. In most cases, little or no further entry of information will be needed. It will be much quicker to complete than the current tax return.”

In his Autumn Statement last year, the Chancellor announced plans to force small businesses and the self-employed to file their tax returns four times a year from 2018.

The Government is spending £1.3bn on the digital overhaul of HMRC to allow this “light-touch” reporting to take place.

By 2020, all self-employed workers and small businesses will have a tax profile online that is similar to an internet bank account, which keeps up-to-date records of the amount of tax paid.

Nevertheless, accountancy firms have warned that compliance costs could rise threefold, while the Forum of Private Business has calculated that micro businesses will spend an extra £600 a year in accounting fees, hitting £1,600, while companies that employ staff will see their costs rise by £500 to £3,400.

“Many taxpayers have told HMRC that they want more certainty over their tax bill, and don’t want to wait until the end of the year, or even longer, before knowing where they stand with their taxes,” HMRC said.

“We also estimate that £6.5bn in tax goes unpaid every year because of mistakes made when filling in tax returns. These reforms will make it easier for taxpayers to maintain accurate and up-to-date tax affairs, reducing the scope for error.”