The taxman has this morning confirmed it is no longer planning to have the smallest businesses report back quarterly on their tax affairs.
HM Revenue & Customs (HMRC) announced 1.3m unincorporated businesses and landlords with turnover less than £10,000 would be able to use the digital services it’s currently rolling out without having to either keep their records digitally or check in with the taxman once every three months.
In addition to the announcement, HMRC also launched six consultations on Making Tax Digital – its initiative to turn HMRC into a digital tax force to be reckoned with by 2020 – and these will be open for replies until November.
The decision to not require 1.3m businesses to report quarterly, which HMRC said came after months of discussion with business and agent groups, may be extended to further groups of businesses while it was also looking into the best ways to help businesses with the transition to digital.
"We are committed to a transparent and accessible tax system fit for the digital age, and Making Tax Digital is at the heart of these plans," said financial secretary to the Treasury, Jane Ellison. "This new system will make the UK's tax administration more efficient and straightforward, and will offer businesses greater clarity when it comes to paying their tax bills.
“By replacing the annual tax return with simple, digital updates, businesses will be able to concentrate on putting people and profit, not paperwork, first."
Mike Cherry, Federation of Small Businesses national chairman, added:
Removing small firms and the self-employed with modest turnovers altogether from the proposals will now mean that in addition to the 1.6m small businesses and landlords that were already excluded, as a result of these changes announced, a further 1.3m small firms and landlords will no longer be in scope.
This means that half of the UK's 5.4m small businesses will not be affected by quarterly tax reporting. The expansion of cash accounting, a longer lead-in time for implementation and the offer of direct financial assistance will also help.
Meanwhile, Andrew Tyrie, chairman of the Treasury Select Committee, said:
Exempting those small firms and the self-employed whose primary income from a business is below £10,000 is welcome. It’s also common sense. They should have been given this exemption in the first place.
Small business owners recoiled so much at the idea of having to fill out something akin to a tax return four times a year that a petition on the matter has previously garnered itself more than 100,000 signatures.