Spring Budget must provide more clarity about digital tax

The government needs to use tomorrow’s Spring Budget as an opportunity to release more information about its ambitious tax digitisation plans, according to a Scottish accounting software company.

FreeAgent, who make cloud accounting software for freelancers, micro-businesses and their accountants, is calling on Chancellor Philip Hammond to unveil more detail about Making Tax Digital (MTD) - including a decision about the final threshold for when businesses will be required to comply with the new legislation.

Although the government launched six consultations over the plans last year and has already unveiled some of the findings from them, it still has yet to specify exactly what information business owners will be expected to file when providing their new, quarterly tax updates to HMRC.

Research carried out by FreeAgent earlier this year has also found that many small businesses still remain unsure about the proposals, with a fifth of micro-business owners surveyed saying they had no knowledge of MTD, while 84 per cent of respondents said they didn’t think the government had provided them with enough information about digital tax.

Ed Molyneux, CEO and co-founder of FreeAgent, said: “Making Tax Digital is the biggest change to UK tax in a generation, affecting millions of business owners. But while our research has found that many micro-businesses are generally positive about the overall idea of digital tax, they still require more details about how it will actually be implemented.

“Therefore I would urge the government to use the forthcoming Spring Budget to provide more clarity about Making Tax Digital, so that freelancers and micro-business owners understand how they will be affected, when they will have to comply with the legislation and how they will be expected to submit their tax updates to HMRC.”

FreeAgent is also calling for a rethink over the forthcoming reform to IR35, which as of April 6th will see public sector employers having to deduct tax and national insurance contributions from contractors’ pay at source, rather than allowing them to defer and claim expenses.

Ed continued: “It is very iniquitous of the government to position the self-employed as not being on a level playing field with those who are employed. After all, self-employed workers have none of the employment rights or the security that employed workers do and there must be some recognition for that - unless they want to cripple this very important and growing part of the UK economy.

“I doubt that there will be any changes made this close to the new tax year, but I would urge the Chancellor to think again about these new IR35 reforms which could potentially have a devastating effect on contractors working in the public sector.”