As you may or may not be aware, the way in which self-employed and landlords submit their annual tax returns is changing. From 2018, the HMRC propose for the process to become mostly digital for most businesses and landlords submitting their business records quarterly. The underlining tax rules are proposed to change to support these.
The HMRC plans to start testing the Making Tax Digital reporting system from April 2017, with an initial cohort of 100 or so testers in place for the pilot, this will include ambitious plans to set targets for 400,000 to sign to the Making Tax Digital scheme by October 2017.
The first group of tax payers, that will need to report under the Making Tax Digital will be sole traders and buy to let landlords. The HMRC has confirmed that it plans to allow taxpayers to upload their tax data using spreadsheets that go through a third-party software tool or app. These are proposed to be free commercial software that the tax payer can download. The business will then record and categorise their income and expense in their software or app. This should reduce errors when reporting quarterly. Businesses will then be prompted to send a summary update to the HMRC.
This will be a bonus to the tax payer as it will give businesses more certainty of their tax bills. Regular reporting to the HMRC will also encourage more attention towards cash flows.
The HMRC initial proposals had set a £10,00 limit on earnings. This would have meant that any self- employed or landlord earning under this amount would be exempt from the new obligations of the Making Tax Digital system.
This hasn’t been finalised yet and many of the professional institutions (ICAEW, ACCA and CIOT) are calling for the threshold to reflect that of the current £83,000 VAT threshold.
We’ll keep you informed of any progression on this, but in the mean time you can learn more about the Making Tax Digital scheme here:
www.gov.uk/government/publications/making-tax-digital/overview-of-making-tax-digital
www.facebook.com/keepingitbalancedcornwall/
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