The Making Tax digital initiative was first announced in Budget 2015, followed by the publication of the 'Digital Road Map', in December 2015. This proposed introducing the requirement for those with self-employment income or rental income over £10,000 (before expenses) to update HMRC quarterly on the income and expenses of these enterprises, rather than including the income on their self-assessment tax return. The intention is that this process, together with more third party information being added to taxpayers' Digital Tax Accounts, would ultimately lead to the abolition of the tax return.

Six consultation documents (and another overview document) issued in August 2016 set out more details of the proposals. These consultations closed on 7 November and we may hear more at the Autumn Statement following the consultation feedback. The quarterly reporting proposals are intended to apply to unincorporated businesses with turnover of more than £10,000 and will come into force from 6 April 2018. However, smaller businesses will not be subject to the requirement for the first year. VAT returns will be included in the system from 2019 and incorporated businesses from 2020. The intention is that commercial software providers will provide accounting software and 'Apps' which will enable taxpayers to maintain digital records of their businesses and submit these to HMRC in the required 3 month periods.

Deloitte's view is that the 6 April 2018 start date leaves insufficient time for businesses to prepare, particularly as the Consultation Documents also propose changes to calculation of profits for small businesses and for rental businesses, and changes in the allocation of business profits to tax years. There has been widespread feedback that whilst any move to simpler tax reporting is welcome, the proposed timescale is too ambitious. We hope we may see some changes announced to the timing in the Autumn Statement.

There are also several aspects of the reforms where there is to be further consultation. There is to be another consultation on what level of turnover should be outside the system in year 1, and also how the rules will affect 'complex businesses' – a term that has yet to be defined. Deloitte's view is that there is no clear benefit for HMRC in extending reporting to audited businesses and in fact considerable cost in delivering information before the year-end. There may also be further consultation on the extent of third party information that can be given directly to HMRC. We hope to hear a high-level response to these consultations in the Autumn Statement.

Other consultations

There have been a number of consultations on other tax matters over the last few months and we can expect to hear the outcomes (or a progress report) at the Autumn Statement.

These include:

  • Changes to the farmers' averaging rules (a move to five-year averaging)
  • A review of the use of Deeds of Variation for tax purposes
  • Replacement of the 'wear-and-tear' allowances for those letting furnished residential
  • accommodation with an allowance based on actual costs
  • Review of employee benefits and expenses
  • Simplifying tax and national insurance on termination payments
  • Changes to the IR 35 rules

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