Digitised tax puts SMBs "at a loss" alleges Pandle

"Weak systems" could cause issues, warns accounting software firm

SMBs could find themselves "at a loss" due to the "weak systems" being utilised by HMRC, according to the founder of accountancy software firm Pandle.

Lee Murphy was responding to the Treasury's plans to digitise the tax reporting process for businesses - a move the Treasury Committee has now found contains "serious shortcomings".

Murphy believes "rushed system development" could cause problems, particularly for SMBs, who will feel more of a sting if processes fail.

"The UK government's call to digitise tax returns by April 2018 has faced backlash as MPs warn that the plans are being rushed through without proper preparation taking place," observed Murphy.

"Improper implementation of this system will inevitably cause errors in the submissions process, which may create chaos in our tax system. HMRC tend to have weak systems in place even for systems in place for many years. Therefore a rushed system developed by HMRC will cause taxpayers, companies and HMRC lots of issues."

Murphy quoted a recent Which? survey that finds 19 per cent of those who have filled out self-assessment tax returns "believe they made an error or [did not understand] the document correctly, and lost out financially as a result".

"Such mistakes can cost 20-100 per cent extra tax due, so it's important the government takes the time to educate individuals and businesses alike to the changes digitisation will bring," said Murphy.

"Ideally, tax digitisation should be introduced for limited companies first, followed by individuals, instead of the other way around, which is currently planned. It would also be beneficial if another few years were added to the timescale to ensure it is implemented correctly."

Back at the initiative's August 2016 announcement, Edward Troup, executive chair at HMRC said:

"Going digital will abolish the annual tax return as we know it by 2020, replacing it with a personalised digital service through which taxpayers will be able to send and receive information to HMRC at the click of a button."