Tax and accounting bodies call for government to delay reporting reforms
UK tax and accounting bodies have urged the government to delay reforms to the tax system which would affect how self-employed people and businesses report their profits.
In a letter sent to Treasury financial secretary Jesse Norman, representatives from five tax and accounting bodies, including the Institute of Chartered Accountants for England and Wales and the Chartered Institute of Taxation, said changes were happening “too quickly.”
Under the government’s new Making Tax Digital rules an estimated 4.3m self-employed individuals and businesses will start reporting their income to HM Revenue & Customs on a quarterly basis from 6 April 2023.
The tax basis period will be altered in the 2022/23 tax year so that earnings are reported on a ‘tax year basis’ rather than a ‘current year basis.’
The change could cause difficulties for companies with international partners with different tax reporting dates, but is is expected to generate billions of pounds for HMRC ahead of schedule.
In the letter, concerned tax and accounting bodies said: “these are major changes to the tax system and require an extensive public education exercise to be undertaken similar to that which was undertaken when we moved to self-assessment in the 1990s.
“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 tax bodies raised concerns that the changes would put a strain on tax advisors, pointing out that when businesses came under the scope of the Treasury’s new Making Tax Digital rules for VAT in 2019 waiting times for HMRC calls more than doubled in a matter of months.
HM Treasury defended the proposals which were suggested as part of the government’s call for evidence on tax reform in March.
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 added that the reforms remain open for consultation, including on the timing of the reform and its interaction with other aspects of the tax system.