Quarterly tax returns ‘put unfair burden on small businesses’

Government plans to force small businesses and the self-employed to file tax returns four times a year instead of once have been questioned by PwC.

A report by the accountant said that the proposal, which is due to come into force in 2018, would increase the administrative burden and costs.

The government wants all business owners to file more regular tax information through online “digital tax accounts”.

PwC’s research, which was commissioned by the Federation of Small Businesses, called on HM Revenue & Customs to consider delaying implementation of the policy following issues with the consultation process.

Bigger businesses should be forced to adopt the policy first, the report recommended, before a phased introduction for small companies. PwC questioned the wisdom of plans to take the opposite approach. It also suggested that the policy should be voluntary.

“There is a significant gap between the current digital capabilities of many small businesses and the digital skills needed to use digital reporting systems,” PwC said.

The group noted that problems with implementing such a scheme in Finland caused “confusion and defaults in reporting and payments”.

MPs and small business owners are concerned about the plan and a petition calling for it to be scrapped attracted 114,000 signatures.

Fears include the impact on seasonal businesses, weak digital skills among some smaller businesses and how those in rural areas with poor broadband connections will cope.

The Treasury committee said that the plan represents “transfer of cost from HMRC to businesses”.

HMRC believes that the plan will help small companies because they will not have to wait until the end of the year to find out how much they have to pay.

The taxman has agreed to exempt the smallest businesses and landlords from digital record-keeping and quarterly updates.

The FSB estimates that the policy will cost the average small company an extra £2,770 a year in addition to the £3,600 they now spend on tax advice.