Making Tax Digital
Mainstream media has recently reported on significant changes announced to the Self Assessment system for individuals, companies and trusts. These changes are wide ranging, but little information has been released on what the new system might look like. Currently, the changes are due to take effect in phases, starting with a pilot scheme in April 2017.
What are the proposed changes?
It is intended that the new system will require the majority of business owners and landlords to maintain digital records in their business using compatible software and send summary updates to HM Revenue & Customs (“HMRC”) every quarter with a final submission within 9 months of the year end. The aim is that the new system will be simpler and easier to maintain.
Who will it affect?
|Voluntary pilot||April 2017|
|Income Tax, NIC & CGT – self employed, larger businesses* and landlords||April 2018|
|Income Tax & NIC – smaller businesses (turnover above £10,000) VAT||April 2019|
|Corporation Tax||April 2020|
*The limits for larger and smaller businesses have not yet been defined.
There is an exemption proposed for very small businesses and landlords, currently this will be limited to those with turnover below £10,000. Some exemptions will also be made for those in remote areas with poor internet access or those unable to use IT equipment through illness or injury.
The end of the Tax Return?
Alongside the quarterly updates, an annual submission is still required and annual accounts will still be needed in order to prepare the year end declaration.
The Revenue have said that they will not charge penalties for the first 12 months of the new system. After 12 months, a points system will be operated so that points will be applied for a late quarterly submission. A penalty will only be issued once a certain amount of points have been accrued. It is not clear when this will replace the current penalty system for VAT.
The new system is still under consultation and these proposals could change before being implemented, we will report further when more detail is available. If you have any questions on making tax digital or tax generally then please contact our Tax Director, Jenny Marks.
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