HMRC
have had a busy few weeks publishing 7 major documents surrounding the Making
Tax Digital initiative, and asking individuals affected to participate and
share their views in response to the consultations.
The aim of Making Tax Digital is to
simplify record keeping and digitise tax reporting for businesses and
individuals so that taxpayers will be able to see their complete financial
picture in one digital account.
However, there has been huge speculation
around what changes will actually mean, particularly for small businesses – in
fact a recent study of over 350 accountants showed that almost 91% fell that
there is not enough information about the initiative in circulation, with over
a quarter advising that without more details they couldn’t testify to being
particularly for or against the reform.
Ambiguous and misleading claims have
been circulating since plans were mooted in the 2015 Budget, with the biggest
concern being that changes would lead to the need for quarterly tax returns
instead of the mandatory annual submission now in place. Advocates allege this
to be especially unfair when the aim of the programme is to eliminate the whole
concept of a big, difficult end of year return.
Here’s what we do know for certain:
- Digital
record-keeping will be required: From 2018 most businesses, sole traders
and landlords will need to start using software to keep records and update HMRC
quarterly - or more often, if they wish.
- HMRC won’t be
offering software: By 2020 HMRC will not provide any
interface or software for filing tax updates. Third party software will be a
requirement (and HMRC is ensuring free options will be available).
- Those below
£10,000 won’t have to switch: Those with an income below £10,000 will
not be required to use the new system. A transitionary approach is proposed for
businesses just above £10,000, but what thresholds will be used has not yet
been declared.
Plus HMRC have have issued their own "myth buster" guide below:
The
hope is that you’ll be more aware of your tax position and therefore able to
communicate with HMRC by using the software to better manage and report your
business finances. Plans would also see HMRC make greater use of information
already held in other workstreams - such as from banks and pension providers –
thereby creating a more cohesive database of info and (hopefully) reducing the
burden of requests on individual taxpayers.
Claims that HMRC plans a new penalty system or ways of paying your tax are apparently embellished as they are still consulting on options, and changes will require ministerial and even Parliamentary approval before happening (if they ever happen).
In reality though we won’t know for sure for some time, as much is still up for consideration and the consultations don’t close until 7th November, and the plan itself is being gradually rolled out as below from now until 2020:
As with any reform – like the introduction of RTI PAYE and digital VAT returns – we’ll continue to review changes, adopt our procedures accordingly and advise our clients on how to be the most tax efficient.
Further info as issued by HMRC - including links to the consultations, and events and webinars where you can voice your thoughts - can be found below:
https://www.gov.uk/government/collections/making-tax-digital-consultations
https://www.gov.uk/government/news/webinars-and-events-for-making-tax-digital
As always, our accounts team are on hand at 01785 248 939 if you have further questions about tax planning.
Catherine McDonald
Business Development and Marketing Coordinator
No comments:
Post a Comment