Making Tax Digital Update From West Accounting in Bristol

Making Tax Digital: HMRC releases further details of its landmark plans

HMRC has published its response to the feedback it received on its Making Tax Digital (MTD) consultations, shedding a little more light on its plans to create a new tax system ‘fit for the digital age’.

The new regime, which is set to be introduced between 2018 and 2020, will require businesses and individuals to register, file, pay and update their information via a secure online tax account.

Under the system, self-employed individuals and landlords will be required to use software or apps to keep digital business records, and to make regular updates regarding their income tax, VAT and national insurance contributions online. HMRC previously proposed a number of exceptions to the requirement to maintain digital records, including unincorporated businesses or landlords where turnover or gross income from property is less than £10,000. The government is now considering the exemption further.

The government has published a raft of proposals, taking into account the views of consultation respondents, and its latest decisions include:

  • permitting businesses to use spreadsheets for their record-keeping, which can be linked to the appropriate software for the purposes of sending updates to HMRC
  • the requirement to keep records digitally does not mean that firms have to make and store receipts and invoices online
  • charities (but not their trading subsidiaries) will not be required to keep digital records
  • end of year activity must be concluded and sent to HMRC by either 31 January or 10 months after the last day of the period of account (whichever is soonest)
  • the entry threshold for cash basis accounting will increase to £150,000 and will be extended to unincorporated property businesses where cash basis receipts do not exceed £150,000
  • giving taxpayers at least 12 months to familiarise themselves with the changes before any late submission penalties are applied.

HMRC emphasised that it intends to introduce the changes gradually, and that the initiative will be thoroughly piloted with businesses before being fully implemented.

However, the plans have been subject to significant criticism, particularly in regard to the ‘short’ timetable for their implementation. The Federation of Small Businesses (FSB) called for the introduction of MTD to begin in 2020, rather than in 2018 as planned, and for smaller businesses to be exempted from the scheme altogether.

Mike Cherry, National Chairman of the FSB, commented: ‘The timetable laid out by ministers in Autumn Statement 2015 is now a total fantasy. It is unachievable given the latest delays. The programme cannot begin before 2020 without causing considerable disruption to economic growth, investment and employment.’

Meanwhile, the Chartered Institute of Taxation (CIOT) also called for a delay in the implementation, and for the mandation threshold for MTD to be raised from the proposed £10,000 turnover to £83,000.

The government will consult further on the specific details and the final legislation is due to be published later this year. Please be reassured that we will be keeping you up-to-date with the latest developments on the MTD project.

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Business groups publish Budget wish lists

Ahead of the 2017 Spring Budget on 8 March, business groups have set out their wishes and priorities for both business and the UK economy.

In a letter to Chancellor Philip Hammond, the Confederation of British Industry (CBI) called for the government to ‘back businesses’ growth ambitions’ to help build prosperity across the UK, and to work alongside firms to ‘prioritise stability’ during periods of economic uncertainty.

The CBI has also urged the government to tackle the UK’s ‘outdated’ business rates regime and limit its ‘growing burden’ on businesses.

Echoing the call made by the CBI, the British Chambers of Commerce (BCC) also advised the government to take action on ‘delivering real reform’ to the business rates system.

The business group called for the government to abandon the ‘fiscal neutrality principle’ in business rates reform, labelling this as an ‘unacceptable barrier’ to the revision of the system.

The BCC also recommended that the government bring forward the switch from the Retail Price Index (RPI) to the Consumer Price Index (CPI) to April 2017, instead of during 2020, as is currently planned.

Meanwhile, the Federation of Small Businesses (FSB) has advocated for a ‘pro-business Budget’ that supports self-employed individuals, urging the government to help more people start up in business. Commenting on the issue, Mike Cherry, National Chairman of the FSB, asserted that the FSB is seeking ‘changes to the social security system so that it better reflects today’s economy’, alongside ‘incentives to help the self-employed pay for their retirement’.

Reflecting on the government’s response to its Making Tax Digital (MTD) consultation feedback, the FSB also proposed that HMRC alters its tax digitisation timetable, and implements the MTD initiative in 2020, rather than in 2018 as is currently planned.

The Chancellor will present the 2017 Spring Budget on Wednesday 8 March. Coverage of the key announcements will be available on our website, so please visit regularly.

“Don’t forget your tax return!”​

The tax return deadline is almost here – by midnight on January 31 you should have filed your 2015-16 tax return and paid any tax due.

If you haven’t sorted yours yet, follow our last-minute tax return tips to avoid the fines.

1. If in doubt, file a tax return

If HMRC expect you to file a tax return – because you’re self-employed or you have other untaxed income – you need to do so even if your income is low and you don’t expect to owe any tax.

2. Understand the dates

Tax dates can be a little confusing, so make sure you’re clear. The 31 January 2017 deadline is for self-employed income that you earnt between 6 April 2015 and 5 April 2016, so you need to include your turnover and expenses for this period when you’re completing your tax return.

3. Make sure you can log in

If you have your Government Gateway user ID and password to hand, you can use them to sign in to your online account to file your tax return. If not, don’t panic: you should be able to use the new GOV.UK Verify service to confirm your identity and access your online tax account. Agents will not need this code for submission.

4. Gather your paperwork

Make sure you’ve got all the necessary paperwork together, so that you can calculate important information like your business turnover and expenses. Ideally you’ll have receipts for your expenses, but if you don’t, check your online bank statements instead to get accurate figures.

5. Understand allowable expenses

You can subtract ‘allowable expenses’ from your business turnover to work out your taxable profit, including the cost of things like business travel, stock and business insurance.

You may be given the option to enter your expenses as a single figure rather than breaking them down into separate costs, but you still need to calculate everything properly.

It’s important to understand what can and can’t be included, so check out our article on tax deductible expenses if you’re not sure.

6. File on time to avoid fines

Perhaps you’re dragging your feet when it comes to submitting your tax return because you don’t think you’ll be able to pay your tax bill.

If this is the case, it’s important to understand that submitting your tax return late could cost you much more than failing to pay on time, so don’t miss the deadline for filing.

A late tax return usually means an immediate fine of £100, and then subsequent penalties if you continue to delay. If you pay your tax bill late, you’ll be charged interest on the amount you owe.

7. Seek help online first

If you get stuck when you’re filling in the form, it’s worth looking for help on the web before you call the HMRC helpline. As the deadline nears, the phone lines are often jammed, and you may wait ages to get through.

HMRC publishes comprehensive Self Assessment guidance and help sheets online, so these could be your first port of call.

8. Double-check before submitting

It’s easy to make a mistake when you’re rushing to get your tax return in on time, so check through your figures carefully before you submit. If you do make a mistake, you should be able to log back into your account to correct it.

9. Remember to pay!

Once you’ve filed your tax return, you can give yourself a pat on the back… but it’s not over yet! The deadline for paying your tax bill is the same as the submission deadline, and HMRC won’t take the money automatically, so you need to make a payment. Luckily, there are several ways of doing this, including the quick and easy method of online bank transfer. Then you can really sit back and relax…

10. Tell HMRC if you can’t pay

If you can’t pay your tax bill by the deadline, contact HMRC as soon as possible to let them know. They may be able to give you some extra time, or let you pay in instalments.

11. Look ahead to next year

Since things were all a bit of a rush this year, now’s a good time to get organised for future tax returns. For example, if you’re using your personal bank account for your business, consider opening a business bank account, which should make it much easier to calculate your business income and outgoings.