Larking Gowen
Larking
Gowen
Making Tax Digital
Making Tax
Digital
September
2016
issue
Major changes are being made to the way in which all taxpayers interact with HM
Major
changes
are being
made This
to the
way in which
all taxpayers
interact
with HM
Revenue
& Customs
(HMRC).
is known
as “making
tax digital”
and work
has
Revenue
&
Customs
(HMRC).
This
is
known
as
“making
tax
digital”
and
work
has
already started with some changes implemented in April 2016, and further changes
already
some changes
implemented
in April 2016,
and further
changes
plannedstarted
throughwith
to completion
in 2020.
These changes
will impact
on every
individual
planned
through
to
completion
in
2020.
These
changes
will
impact
on
every
individual
and business, regardless of size.
and business, regardless of size.
What follows is a brief summary of what we know about this initiative so far, with many of
What
follows
is atobrief
summary upon
of what
knowbefore
aboutthey
this are
initiative
so far, with many of
the finer
details
be consulted
by we
HMRC
introduced.
the finer details to be consulted upon by HMRC before they are introduced.
What is changing?
What is changing?
First announced by George Osborne in the March 2015 Budget, the Government is
First announced
by George
Osborne intax
thesystem
March fit
2015
Budget,
Government
is
building
“a transparent
and accessible
for the
digitalthe
age”.
This will include:
building “a transparent and accessible tax system fit for the digital age”. This will include:
· Digital tax accounts for all taxpayers (individuals and businesses)
Digital tax accounts
all taxpayers
and businesses)
·· Businesses
required for
to maintain
their(individuals
records digitally,
filing quarterly reports with HMRC
·· Real-time
Businesses
required
to
maintain
their
records
digitally,
quarterly reports with HMRC
updating of information and records held by filing
HMRC
·· Eventually,
Real-time updating
of
information
and
records
held
by
HMRC
the end of the self-assessment tax return
· Eventually, the end of the self-assessment tax return
For businesses, by far the most significant change is the requirement for digital record
For businesses,
far thethe
most
change
is the
requirement
forand
digital
record
keeping.
This willbyinvolve
usesignificant
of software
or apps
to record
income
expenditure,
keeping.
This
will
involve
the
use
of
software
or
apps
to
record
income
and
expenditure,
which can submit information to HMRC once every three months.
which can submit information to HMRC once every three months.
It is worth noting that landlords who let out rental properties are included within
It is definition
worth noting
that landlords
who
outtorental
properties
included
the
of ‘businesses’
and
will let
have
comply
with theare
new
record within
keeping
the
definition
of
‘businesses’
and
will
have
to
comply
with
the
new
record keeping
requirements.
requirements.
Larking Gowen
T
0845 077
4165*
Larking
Gowen
E
T [email protected]
0845 077 4165*
*Calls will cost you 5p per minute plus your telephone company’s access charge.
E [email protected]
*Calls will cost you 5p per minute plus your telephone company’s access charge.
@LarkingGowen
@LarkingGowen
larking-gowen.co.uk
larking-gowen.co.uk
Self-employed and landlord businesses will move
to the digital format from April 2018 for income tax
and NIC purposes. The VAT obligations will then
be added from April 2019.
Case studies:
There is a proposed exemption for businesses
with income below £10,000 per annum, and
a potential 12 month delay for the smallest
businesses above that exemption.
Currently, Adam files a self-assessment tax return
to declare his rental income. His property income
is around £11,000 each year. Adam maintains
the records in a paper diary.
For individuals, the changes have already started
to happen. Every person can register for a digital
tax account with HMRC now. At this point in time
the account contains only basic information but
over the next four years more data will be added,
such as details of employer/pension income
and bank interest received. Eventually, it will be
possible to declare all other sources of income
and gains using the digital account, so that by
2020 it will no longer be necessary to file a
self-assessment tax return.
Making tax digital will mean that from April 2016,
Adam has access to his digital tax account. This
will start to pre-populate details of his pension
income into his tax return.
If you look after or are involved with a not-for-profit
organisation or charity, then it is unlikely to be
affected by these proposals. HMRC are consulting,
however, on whether charity trading subsidiaries will
be included.
Adam – a pensioner with one let property
From April 2018, Adam will need to maintain
details of his property income and expenses on
an app or software which can make quarterly
submissions to HMRC. These submissions will
automatically appear in his digital tax account.
Depending on what other sources of income
Adam has, he may still need to file an annual
tax return until 2020. By that time, it will be
possible to declare all sources of income using
his digital account and a tax return will no longer
be needed.
Bella - a self-employed beautician who is VAT
registered and employs two members of staff
Currently, Bella files quarterly VAT returns and an
annual self-assessment tax return. She operates
a payroll scheme for her employees. She uses
spreadsheet based software to maintain her
records.
Making tax digital will mean that from April 2016,
Bella has access to a personal and business tax
account.
From April 2018, Bella will need to maintain
details of her business records on an app or
software which can make quarterly submissions
to HMRC. These will appear in her digital tax
account.
Bella is already making quarterly submissions to
HMRC via her VAT returns which she will continue
to file online as normal until they become part
of her digital tax account in 2019. Her payroll
submissions to HMRC will not change but
eventually she will be able to do certain things,
such as set up new employees, within her digital
tax account.
By 2020, all of Bella’s self-assessment, VAT and
payroll records will be contained within her digital
tax account.
How we can help you
Larking Gowen is committed to helping you with these
changes and providing you with solutions which are easy
to understand and use.
There will be no ‘one size fits all’ solution to HMRC’s
proposals as they are so wide reaching however, we
have extensive experience in dealing with all types of
individuals and businesses and will be offering tailor
made solutions for all of our clients.
We can work with you in implementing a new digital
record keeping system, or even maintain it for you,
making the quarterly submissions on your behalf.
We will still provide the same support, advice and peace
of mind that we do now, ensuring that you remain fully
compliant with all of the new reporting requirements.
We will provide updates as further details emerge but
please feel free to get in touch with your usual Larking
Gowen contact if you have any concerns at all.
We have prepared a list of frequently asked questions
which are available on our website.
Larking Gowen
is a member of MHA,
an association of
independent firms.
Larking Gowen
T 0845 077 4165*
E [email protected]
*Calls will cost you 5p per minute plus your telephone company’s access charge.
East Anglian Widgets Ltd –
a trading company
Currently the company files quarterly VAT
returns and an annual corporation tax
return. It operates a payroll scheme for its
employees.
Making tax digital will mean that from 1 April
2019 the company will need to maintain
details of its business records on an app
or software which can make quarterly
submissions to HMRC. This is to record VAT
from 2019 and corporation tax from 2020.
The company should be given access to
a digital tax account by 2020 which will
contain all of its corporation tax, VAT, and
payroll records in one place.
The company will have the option to pay
all of its taxes (corporation tax, VAT etc) in
smaller more regular payments. It will also
be possible to offset a refund of one type
of tax against another.
This bulletin is designed for the information of readers. Whilst every effort
is made to ensure accuracy, information contained in this bulletin may not
be comprehensive and recipients should not act upon it without seeking
professional advice. Arrandco Investments Limited is the registered owner of
the UK trade mark for Baker Tilly and its associated logo.
© Larking Gowen Group 2016. All rights reserved.
@LarkingGowen
larking-gowen.co.uk