The Association of Chartered Certified Accountants (ACCA) has urged HMRC to rethink on the planned changes to Income Tax Self-Assessment (ITSA), warning that the proposals are “profoundly disconnected from business reality”.
In its response to HMRC’s consultation on introducing more timely ITSA payments, the accountancy body says the plans do not meet business needs and could impose a fresh administrative burden on companies, HMRC and taxpayers.
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ACCA describes the proposals as flawed and unfair, arguing they risk adding further bureaucracy at a time when businesses are already managing complex obligations.
ACCA UK Technical and Strategic Engagement head Glenn Collins said: “HMRC’s intention to help taxpayers manage their liabilities more effectively is one we support, but good intentions need workable proposals, and these fall short.
“Given the scale and significance of what is being proposed, we would have expected far greater development of the detail at this stage of the consultation process.”
ACCA’s central concern is what it sees as a clear gap between HMRC’s proposals and the day-to-day realities of running and growing a small business in the UK.
Under the plans, taxpayers would be required to forecast their income tax liabilities during the year.
ACCA argues this is inherently difficult for firms whose profits vary, and could be especially problematic for businesses in agriculture, retail, hospitality and construction.
The body warns that poorly designed forecasting rules are likely to lead to both overpayments and underpayments.
It says this would create cash flow problems for the very small businesses the reforms are intended to support.
ACCA is also questioning the fairness of the approach.
The proposals distinguish between taxpayers who have employment income alongside self-employment income and those who do not, a difference the organisation challenges both in principle and in practice.
One of ACCA’s strongest objections is directed at the idea of collecting ITSA via Pay As You Earn (PAYE).
The body believes this would give employers significantly greater visibility into an employee’s personal financial affairs.
It argues that this raises serious concerns about taxpayer confidentiality, which it says have not been properly addressed in the consultation. ACCA says it will continue to engage with HMRC throughout the consultation period, pressing for ITSA reforms that are “proportionate, practical and genuinely supportive” of small businesses and the self-employed.
