Recently, we brought news of HMRC’s proposed changes with Making Tax Digital. As part of an overhaul of the tax system, HMRC recently announced that landlords and other registered businesses (LLPs and LLCs) will need to record quarterly tax reporting from 2018. Accounts bodies have expressed concerns, but HMRC feel it will simplify tax declaration and payment for most business types.
New System as of 2018
It is the biggest overhaul of its age, but the quarterly declarations that are likely to go ahead from the tax year 2018-19 are designed to simplify taxing. At present, only large corporations are required to report quarterly figures, but small businesses will be expected to do so from 2018-19. This includes landlords regardless of how many properties he or she owns.
In the middle of all this are accountants, those who work independently and those who work for businesses who will be affected. They feel that 2018 is too soon to make these changes. The HMRC hit back, pointing out that the rolling out of new apps available on smartphones will make tax declarations simpler than they have ever been.
If you presently use an accountant for these services, it will be advisable to consult with them as soon as possible regarding your liabilities and requirements ahead of these changes. They may be several years away, but it’s never too soon to prepare.
As It Stands
The threshold for cash basis self-employment is presently £83,000 (information correct at tax year 2016-17). This means the majority of freelancers and sole traders qualify. Property owners were always an exception with a much lower limit, hence the proposed changes in our previous article. If you have established a LLC or LLP, you are unlikely to be offered the cash basis and will be expected to submit quarterly accounts. The major benefit going forward is the proposed digital submission for the tax system, including a new range of apps to help simplify submission, calculation and payment of NICs, Income Tax and VAT.
Details on New HMRC Apps
At present, eligible businesses must record yearly accounts. Those who are VAT registered need to declare VAT quarterly in line with their accounting period. This has created headaches for those who register as smaller businesses, but part of the changes should improve this accounting. If you have set up a business (rather than sole trader declarations which are usually cash basis) to handle your rental income, you probably use an accountant.
In future, the HMRC say that new apps should be able to scan or photograph invoices directly into their phone. This will be transmitted automatically and added to the quarter’s account file. Potentially, this could create a simpler and more efficient tax system should it go ahead.