LITRG Press release: Will new guidance tool for the self-employed help business-owners understand their tax?

Victoria Todd, Head of LITRG, said:

“We welcome any accurate guidance which improves the understanding of the tax system and encourages people to get their tax right. Most self-employed taxpayers want to get their tax affairs right but are often daunted with where to start with their business accounts and completing their tax returns, especially if they are on a low-income and cannot afford professional advice.

“We hope that the tool will be launched in time to help the self-employed complete their 2019/20 tax returns, however the most important thing is that the tool is fit for purpose. In our experience, such tools are only as good as the questions asked and answers given and so care needs to be taken in development.”

It is vital that the purpose and functionality of the online tool is clear to the self-employed user. This means that:

• any limitations should be clearly explained
• a list of what is needed to complete it should be provided up-front (as often tools cannot be saved during their use)
• box entries require proper explanation with easy-to-understand language so that users are supported to give accurate answers
• users should be able to obtain a copy for their records – for example by automatically receiving a copy by email (being prompted to print or save a copy would also be helpful but may not always be possible, e.g. if the form has been completed at a voluntary online centre). This could be important evidence in the event of challenge by HMRC, or in a Tribunal case where the user has relied on the guidance given by the tool.  

Victoria Todd continued:

“The self-employed often need to digest a lot of information when they are also busy running and growing their businesses and a tool which provides guidance to specific trades will be useful. This is especially true where tax rules differ for different sectors, for example childminders. It is usually impossible to cover every potential scenario in a tool such as this and so it can never be a replacement for more detailed guidance.

“Sometimes self-employed taxpayers need to decide how to claim certain expenses such as calculating and apportioning an expense or using the simplified expense rules. It is very important that the tool explains the different methods to enable an informed decision to be made because the tax relief could vary significantly depending on the individual circumstances.

“As ever, we are willing to work with HMRC to help develop and test this new tool, so that it provides the best results for its users.”

Notes for editors

1. Full Budget 2020 document, para 2.158:

“2.158 Tax guidance for self-employed people – To make it easier for self-employed people to navigate the tax system, the government will launch new interactive online guidance for taxpayers with non-Pay As You Earn income this summer”