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HMRC clamps down on self-employed and limited companies

Over my 40 years in practice there has been a sea change in how HMRC administers and collects all taxes.

My manager used to tell me stories about members of staff who left clients records in the corner of the to do their national service in the army and then returned to their firm eighteen months later to pick them up and again and complete the business accounts for the client concerned,

An eighteen month delay in preparing accounts today would lead to some kind of penalty, whether it be from HMRC or Companies House. My point is that every return now has a return and a corresponding fine that attaches to it for late submission or payment.

This is a relatively recent phenomenon but was inevitable given the cost of administering and collecting taxes. The last significant change to tax collection was the RTI payroll system which became mandatory for employers in April 2013. This has largely been a success and HMRC are now looking to bring in digital tax reporting from 2018.

To quote leading Tax expert Tim Palmer “from April 2018 tax is never going to be the same again”. The self employed, including those with rental income over £10,000, will be required to complete some form of quarterly tax return and perhaps a quarterly payment. This lends itself to more use of technology in terms of uploading information direct from accountancy packages to the HMRC government portal which seems a good idea in theory but whether it will work in practice remains to been seen.

I see some parallels between this and the RTI payroll scheme in so far as it works more in real time than the current Self Assessment system and gives scope for including more taxes in its grasp. The bottom line is that HMRC wants taxpayers to declare their income earlier and potentially pay their taxes earlier.

As the title of this blog alludes to it seems to me as HMRC would like to treat the self employed as if they were employed. This is further evidenced by their plans to require agencies and end clients to deduct tax at source from contractors using personal service companies in the public sector. More about this in my next blog….