with Alastair Byrne, of JWP Creers

FOLLOWING on from the Budget announcements in 2015 and 2016 regarding bringing the self-employed tax payment system more in line with PAYE, HMRC have issued a number of consultations on how they see the system working.

“Making Tax Digital” is at the heart of these reforms, which will eventually see the introduction of simple, secure and personalised digital tax accounts for businesses and individuals by 2020.

Broadly, by April 2018 most businesses and the self-employed will have to update HMRC on a quarterly basis on their business results and make a payment on account of the income tax due.

This will include simplified reporting requirements requiring potentially less input and eliminate complex accounting adjustments.

There will be a deminimus exemption for all unincorporated businesses with gross income/annual turnover below £10,000, and help offered if businesses can’t use digital software.

HMRC optimistically believe

• Businesses won’t have to keep any additional paper records.

• One report could cover both Income Tax and VAT reporting requirements.

• Businesses who are not using the cash basis of accounting could make accounting adjustments such as stock adjustments etc either mid-year or at the end of the year.

• Allowances and reliefs, such as Annual Investment Allowance, could also be notified to HMRC either in-year or at the end of the year

• Cash accounting could be extended to larger businesses, as this will be simpler for them to use, with a doubling of the current entry threshold, which matches the VAT registration threshold - so a business would be able to begin using the cash basis of accounting if it has sales up to £166,000, using today’s VAT registration threshold.

These proposals are some of the biggest changes to the tax system in decades, which are going to affect how both taxpayers and their agents work together with HMRC.

Quarterly reporting for business looks a ‘given’ and from 2018 – that’s a ‘blink’ away, so it is important to understand what will be expected of your business.

Please contact us with any queries you may have.

Email Alastair Byrne at ajb@jwpcreers.co.uk or telephone him on 01904 717260.