We have seen some unusual political times over the last few years and these have produced uncertainties for the many small businesses that are the lifeblood of the UK economy. I have written recently about Making Tax Digital (MTD) and how this would have a significant impact for these small businesses, including those with rented properties.
With the recent general election many of the proposals from the 2017 Budget were put on hold pending the outcome. MTD was one of these issues and, in response to criticism that the timetable doesn’t allow enough time for a smooth transition to a digital system, HM Treasury has published a revised timetable.
Businesses with a turnover above the VAT threshold (currently £85,000) will be required to keep digital records for VAT purposes from 2019. Businesses will not be asked to keep digital records, or update HM Revenue & Customs (HMRC) quarterly, for other taxes until at least 2020.
Making Tax Digital will be available on a voluntary basis for the smallest businesses, and for other taxes. This means that businesses and landlords with a turnover below the VAT threshold will be able to choose when to move to the new digital system.
As VAT already requires quarterly returns, no business will need to provide information to HMRC more regularly during this initial phase than they do now.
All businesses and landlords will have at least two years to adapt to the changes before being asked to keep digital records for other taxes.
HMRC are fully committed to supporting businesses in this transition. HMRC have already begun piloting the Making Tax Digital services and will continue to do so, testing the system extensively with businesses. It will start to pilot Making Tax Digital for Business (MTDfB) for VAT by the end of this year, starting with small-scale, private testing, followed by a wider, live pilot starting in spring 2018. This will allow for well over a year of testing before any businesses are mandated to use the system.
These changes will be legislated for as part of the Finance Bill 2017, which will be introduced as soon as possible after the summer recess.
I have been talking to many local businesses, and there is still a lack of awareness of MTD, and so I am not surprised that the Government has taken steps to delay implementation. At Larking Gowen, we have been talking to our clients about MTD and have received a very positive response. Our mantra has been to get clients onto a cloud-based accounting package as soon as practical, not just to satisfy the legislation but to assist with the management of their businesses by providing live, up-to-date financial reports.
If you would like to know a bit more about what systems are available, please let me know or for more information on MTD please visit our dedicated Making Tax Digital web page.
Another significant change resulting from the Finance Bill introduces new rules for deemed domiciled individuals in the UK for tax purposes from April 2017. This is potentially a very complicated area of tax legislation and so you should consult your usual advisor if you think that this may affect you. Certain individuals will be treated as if they were domiciled in the UK for the purposes of income tax and capital gains tax from the start of the 2017-18 tax year.
There are two categories of individual who will be affected by this rule; those who are domiciled outside the UK and were born in the UK with a UK domicile of origin; and those who have been resident in the UK for at least 15 of the preceding 20 tax years.
For more information contact me on 01473 833411 or at email@example.com.