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
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.
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.
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
accommodation with an allowance based
on actual costs
Review of employee benefits and
Simplifying tax and national
insurance on termination payments
Changes to the IR 35 rules
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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