The biggest changes in reporting and tax facing the small business owner in years

I’m sure by now you will have heard about Auto Enrolment and possibly some of the legal duties that will be placed on many UK small business owners.  2016 does seem like the start of a pretty tough few years with the burden of more HMRC tax collecting and digital reporting falling onto the small business owner.


The biggest wave of small businesses being affected by Auto Enrolment in the second half of 2016

The second half of 2016 will see the largest staging yet of businesses into Auto Enrolment schemes for their staff affecting over 500,000 small business owners.  Then there is a new national living wage being introduced along in April along with changes to tax charged on dividends.  So all of this will mean more increased administrative burden and reporting on employers and of course increases in operating costs for the business which could ultimately mean lower profits for the owners unless of course they increase their profits through greater sales, reduction in costs, price increases or selling more frequently or additional goods or services to their existing clients and customers.


There is no Status Quo

I saw a piece of wall art the other day (Nigel Botterill’s rule no 14) which summed up this up beautifully, a picture of Status Quo with the words “You are either growing or shrinking there is no Status Quo”.   Either way it means an increase in profits is required just to stand still.  Then of course between 2016 and 2020 we are going to see the introduction of quarterly reporting to HMRC.  Nobody really knows exactly how this will work as HMRC haven’t released the details yet.  All we do know is that small business owners will have to submit information to HMRC quarterly which of course means that you will have to keep your records up to date which is going to mean that many business owners are going to have to introduce a satisfactory form of record keeping, for ease probably cloud based so there accountant can log in and glance over the figures before submission.  The business owner will probably requires this at the very least to avoid paying too much tax let alone avoid an inquiry for making mistakes! 


A leap into the unkown of HMRC Digital Reporting

Whilst no one really knows how the world of digital reporting will pan out, there are a elements of it which will undoubtedly be good for the very small micro business owner or sole trader in that they will know what their tax liability is likely to be, it will be interesting to see how HMRC will deal with ending the payment on account regime especially for the businesses that are struggling to pay their tax already.  Whilst I can personally see some positives for business owners paying their taxes as they go along I can’t help think that a lot of the benefits are in the hands of HMRC and effectively bringing forward a whole pile of cash!


Does this mean that the small business owner will do HMRC’s work for them?

I personally have concerns that initially there could be a lot more Enquiries from HMRC staff as people get used to reporting quarterly , I fear lots of mistakes will be made as let’s be honest most people spend most of their time running and working in their businesses and not on keeping a perfect set of computerised books!”  The admin and accounts is a necessary evil and one that quite frankly is the bottom of the priority list for lots of business owners, rightly or wrongly, with the day to day struggle of making money and paying the bills/providing for their families as No.1. I worry that as HMRC reduces its overheads, loses staff and does more of the analysis of the numbers by computer you risk a common sense approach to opening up aspect Enquiries. Let’s be honest mistakes are made now on Vat returns and penalties are quite steep if you miss the deadlines, so I can only see this getting worse with more administrative burden on the poor business owner who is trying genuinely to make an honest living.


Watch this space as none of us know what is happening yet as we don’t have a crystal ball but I can predict turbulent times for all of us in the not too distant future.  Less HMRC staff means more of the regulatory duties falling on us the unpaid tax collecting public.

This article reflects the facts and opinions of the writer at the time of writing.  This article is for general information only and no action should be taken, or refrained from, as a result of this information. Professional advice should be taken based on specific circumstances in each individual case. Whilst we endeavour to ensure that the information contained in this article is correct, no liability will be accepted by KMA Accountancy t/a Kim Marlor Associates Ltd or damages of any kind arising from the contents of this communication, or for any action or decision taken as a result of using any such information

Sources and Thanks go to Nigel Botterill for Botty Rule no 14 – 

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