Plan for 5 tax returns a year axed

MILLIONS of small businesses are celebrating after ministers shelved plans to force them to file an extra four tax returns a year.

The system was due to be rolled out next April and pilot schemes were under way.

Businesses would have had to file quarterly returns for income tax and National Insurance – plus their annual tax return in January – and would need digital accounting records.

But the plans were axed from the Finance Bill last night as ministers rushed a slimmer version of Philip Hammond’s Budget through Parliament ahead of the General Election.

The omission means the scheme will now be delayed – and potentially scrapped – by the next Government. Many other policies were axed from the Bill, including a tax raid on the self-employed that slashed the tax dividend allowance from £5,000 to £2,000, along with a clampdown on tax breaks for those with nondomiciled status.

Mike Cherry, national chairman of the Federation of Small Businesses, said: ‘This is a major victory for the self-employed and small businesses against a system which would have disproportionately hit them with extra costs.’ The Treasury Select Committee previously branded the plans ‘over-ambitious’ and raised concerns that the cost of maintaining digital records would hit small firms. The Government insists the Making Tax Digital part of the Finance Bill will reduce accounting errors which cost billions in uncollected tax.

But with only six weeks before the election, there was not enough time properly to debate many of the changes. A new tax on soft drinks with the most added sugar was one of the only parts of the Bill to survive.

The Conservatives will seek to reintroduce the changes to the tax system at the next Budget should they retain power on June 8.