Small Businesses: Tax Reporting

George Kerevan Excerpts

Monday 25th January 2016 Westminster Hall

[George Kerevan (East Lothian) (SNP)]

I commend the hon. Member for Hertsmere (Oliver Dowden) for bringing the matter to our attention. As is usually the case with Petitions Committee debates, we come here to speak on behalf of not ourselves or our parties, but the 100,000-plus individuals and small businesses who have expressed their concern.

I heard the Minister’s words in the Chamber about the Google issue and I take his point that small businesses are not being asked to commit to quarterly full tax returns. That is understood, but the very fact that so many people have signed the petition—every Member will be able to cite examples of constituents and local businesses who have expressed their worries—shows how worried people are, and that indicates clearly that the Government need to consult further.

This is not about whether we should implement a fully electronic, real-time tax system on the internet, as all that would provide benefits. The issue is not the technology, but bringing that technology into play and taking small businesses and the electorate with us. The charge against the Minister and the Government, which is not new or made in a cavalier way, is that there is a rush to judgment.

The Minister simply has to tell us that there could be a delay in implementing the quarterly information updates and that, rather than setting a band at £10,000, there could be a variation as to when small businesses of various sizes are brought into the system. He could tell us about checks and balances with regard to the delivery and effectiveness of HMRC’s system that must be addressed before activities such as updating quarterly are triggered. He could provide all sorts of safeguards so that we could reassure our constituents and give all-party support to the introduction of the new technology.

[Bill Esterson (Sefton Central) (Lab)]

Like the hon. Gentleman, I and, more importantly, my constituents would be fascinated to learn how increasing the rate of reporting to quarterly—whether that involves a full report or an update—reduces the amount of administration faced by businesses. That is a crucial point. Did he hear the estimates at the time of the Chancellor’s announcement that HMRC would collect an additional £600 million as a result of the policy? Is the purpose of the change really to increase tax returns from small businesses? Deals such as that with Google, which was the subject of today’s urgent question, have caused great unease and real anger not just in my constituency, but right across the country.

[Philip Davies (in the Chair)]

Order. Before Mr Kerevan resumes his speech, may I say that interventions should be somewhat shorter than they have been?

[George Kerevan]

I am happy to reinforce the hon. Gentleman’s point. Indeed, various Treasury papers suggest that the shift towards a paperless tax system will increase receipts by about £600 million. That is not a bad thing, and no one would oppose it if it happened, but the issue is that the Minister and HMRC are rushing to judgment in introducing the proposed system. They think that moves to put it in place will be so advanced by 2020 that they will be able to start instructing small businesses to update quarterly.

Buried in the small print of last November’s Treasury press notice is a suggestion as to one of the advantages that will come from the proposal:

“HMRC expects the number of calls”

to its various call centres

“to reduce from 38 million in 2015-16”

to a mere 15 million by 2020. Magically, as a result of the electronic vision being presented to us, about 23 million phone calls will no longer be made to HMRC. Does anyone here, the Minister included, actually believe those numbers?

In the run-up to introducing a new system, the likelihood is that things will go wrong. If we are lucky, we might make something like the proposed saving in calls 10 years from now, but I doubt that that will happen between now and 2020. I have great respect for the Minister, but I would like to hear him swear on his heart that he actually thinks we will deliver 23 million fewer calls.

[David Morris (Morecambe and Lunesdale) (Con)]

From what I can gather, the whole point of having a trial period from 2018 is to iron out that anomaly in the system. Would the hon. Gentleman not agree that it is welcome that we are using small and medium-sized enterprises and self-employed people as a test bed, rather than putting through some sort of virtual reality programme?

[George Kerevan]

I could not agree more. At the risk of repeating myself, I stress that the Scottish National party—I think this goes for all parties—agrees that this is the road to take and that we need to consult, but there is a question over the speed at which this is being done. I understand why the Treasury and HMRC have to sell things and to make promises about what they can deliver but, as the hon. Member for Hertsmere said, experience proves that the introduction of major IT systems rarely works out, particularly when they are on this scale. We are talking about getting 50 million taxpayers and small businesses on this system between now and 2020, but that will not happen.

The Government need to slow down and consult more. The Minister has to stop putting in place arbitrary timetables for when the consultation will work itself out. In particular, he has to stop telling us that he can implement the system in 2020 and impose quarterly returns, which is the thing that is worrying small businesses. Instead, he should concentrate on bringing the consultation to a point where everyone is on board, and then the system will come into play.

I want to reinforce an important point that other Members have made in interventions: we do not have full digital coverage in this country. When Culture, Media and Sport Ministers get up in the main Chamber and talk about getting to nearly 100% coverage, what is the target date? It is 2020, but that may slip. If the new system needs 100% broadband coverage, it makes much more sense to wait until that coverage is in place before switching over the entire British tax system, including the system on which small businesses depend, to a new one. That is another argument for delaying full implementation until 2025 or 2030.

I worry that there is a hidden agenda. Clearly, the Government are attempting to make cost savings. The very Treasury press statement that introduced the idea of moving quickly to a new electronic tax system by 2020 told us that HMRC seeks to make

“£717 million of sustainable resource savings”

by 2020. The system is being put in place at the same time that HMRC is being expected to make major cuts. Again, that does not all stack up.

My real point to the Minister is that no one opposes the introduction of this system, but clearly there has been a catastrophic failure in how the Government have presented it to small businesses. We hear constantly from Ministers that they are pro-small business, so now is the time for them to honour those words. If they simply consult more, delay the introduction of the new system until they are sure that they have everyone on board and set aside the requirement for quarterly reporting until they are sure that the system is actually working, they will achieve success.