The Treasury Select Committee has told the Administrative Burdens Advisory Board to review the estimated costs of mandatory quarterly tax reporting to small firms.
But the Federation of Small Businesses has beaten it t the punch, commissioning an external economics consultancy to provide an independent estimate of the cost to a UK small business of Making Tax Digital. These calculations showed that the average cost would be £2,770 per business.
Mike Cherry, FSB National Chairman, said: “We are delighted to see the Treasury Committee embrace our recommendation for a full pilot of mandatory quarterly tax reporting before Making Tax Digital is launched. Comprehensive testing of the programme is critical to minimising the disruption it will cause to small firms at a time when the costs of doing business are at their highest since the beginning of 2014.
“Research commissioned by FSB indicates that HMRC has significantly underestimated the true cost to small businesses of quarterly tax reporting. We therefore fully support the ABAB review and look forward to working with the body to further scrutinise HMRC’s implementation of Making Tax Digital.
“We are also very pleased to see that HMRC has now published an updated impact assessment which we will carefully assess. However this should have been available much earlier.
“Unlike the figures posited by HMRC, FSB’s calculations were conducted externally to ensure they are independent, objective and robust. The onus is now on HMRC to explain why their assumptions remain so out of sync with those of leading business and accountancy groups.”
In ABAB’s 2016 annual report, the independent watchdog refused to support the Government’s plans for mandatory quarterly tax reporting, stating that “compulsory digital record keeping and quarterly online updates is not an approach we can endorse.” ABAB further noted it held “significant concerns”, shared by FSB, that “the proposals for quarterly updates will be more burdensome than they currently are with increased record keeping and compliance costs.”
Earlier this year, the Treasury Select Committee warned that without sufficient changes, HMRC’s Making Tax Digital programme “could be a disaster” for small businesses.