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Self-assessment date change to cause chaos and increase costs

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If you are one of the 2.5million taxpayers that has to complete a self-assessment tax return, the deadline for filing your form may be brought forward by up to four months. Worse still, if you employ an accountant, your fees may increase. 75% of accountants say that the change will increase their costs and 66% of them will pass those costs on.

In this year's Budget, Gordon Brown announced that he'd accepted the recommendations of Lord Carter - in his review of HMRC's online services - and from 2008, would bring forward the deadlines for filing sef-assessment tax returns from January 31 to September 30 for paper returns and November 30 for online returns.

Without any consideration for the 2.5milion self-assessment taxpayers or the accounting profession, Brown stated that he would implement the recommendations without consultation.

The announcement provoked outcry amongst taxpayers and tax professionals alike. Many believe that the change will cause chaos and increase costs for all concerned; taxpayers, accountants and HMRC. Accountants will have far less time to complete all the tax returns on behalf of clients and will have to take on extra staff to cover this spike. This will result in increased costs which wil inevitably be passed on to taxpayers.

In response to the announcement, the UK's tax and accountancy bodies surveyed their members on the impact bringing forward the self-assessment return deadlines would cause. The results of the survey conclude that:

• 75% of agents expect their total costs to increase as a result of the proposals

• 66% would pass the extra costs on to customers

• 92% of agents said that the number of provisional returns would rise - increasing paperwork and costs, as these have to be corrected manually when the final figures are known
• Increased number of provisional returns will increase the number of manual interventions by HMRC, thereby increasing their costs

• In many instances it will not be possible to prepare self employed accounts early enough to allow completion of tax returns by the proposed deadlines. This is likely to have a particular impact on proprietors of seasonal businesses

• Staffing will become a serious problem for agents during the tax return season. 62% of respondents said that they would have difficulty in securing staff at the right level, 48% feared the loss of staff through increased work pressures and 50% foresaw problems with the Working Time Directive

• Having encouraged businesses, under self assessment, to adopt an accounting date which fits as closely as possible with the tax year end of 5th April, the new proposals are likely to encourage precisely the opposite behaviour.

Commenting on the research, Paul Aplin, Deputy Chairman of the ICAEW Tax Faculty, stated, “The bodies’ conclusion is that this proposal is not in the public interest, as it will increase costs for both taxpayers and HMRC.

“We call on the Government to re-visit their decision to implement Carter without consultation or consideration of the practical impacts that this will have on small businesses and the accountancy profession.”

A copy of the report has now been passed to HMRC and HM Treasury. Hopefully, common-sense will win, Gordon Brown will back-track and Lord Coles' recommendations will be filed in the appropriate place!

Posted June 9, 2006