A new document about Digital Tax Accounts has been released by the Government. Entitled Making Tax Digital, it consolidates information that has been in the public domain since the March Budget. It details how and when HMRC will convert from its current systems to the new digital one.
It is the view of many commentators and reporters that Digital Tax Accounts, both for individuals and businesses, will be the rule by 2020.
What is surprising is that little or no attention has been drawn to the requirement for “most” self-employed people and landlords to make quarterly returns from April 2018.
- Personal and Business Tax Accounts
These already exist with Business Tax Accounts having been around for some time and are currently used by two million small businesses. Personal Tax Accounts however were launched only two weeks ago in the form of a public beta. They will be officially launched in 2016.
- The tax return form will be replaced with a digital tax account.
It will no longer necessary to submit a tax return form, taxpayers and agents will work with an online tax account. Although similar to a tax return, it will still that carries out the assessment of tax. This is potentially the most significant change. This enable taxpayers to submit information to HMRC. However, self-assessment will cease as it will be HMRC will mean if you disagree with HMRC’s assessment you will have to contest it immediately otherwise payment will come due at the appropriate time
- The self-employed and landlords will need to make quarterly returns.
HMRC intend to collect and process information as close to the event and, on page 7, says this must be at least quarterly. Tax assessments will be raised on this basis, although it doesn’t say when or how long a taxpayer has to pay. This be phased in from will April 2018.
- Capital gains tax on property disposals will be paid within 30 days after the disposal from April 2019.
This is a substantial change to the CGT system and considerably cuts short the amount of time a taxpayer has to pay this tax.
- Quarterly reporting will be rolled out to limited companies in 2020.
At the very end of the document, on page 12, it mentions that Corporation Tax will follow Income Tax into the quarterly reporting routine.
The introduction of quarterly reporting and payments will have serious cash flow implications for many small businesses and should be considered well in advance when the final details are known.
There are still many issues to be considered and the actual mechanics of some of the changes is still not known and will have to be determined by all parties. Consultations are expected in the New Year.
Watch this space!