TALKING
TAX..TALKING TAX..
WHEN ARE WE MAKING TAX DIGITAL (MTD)?
As pioneers of MTD (we were chosen as the first accountants to take part in the scheme) it’s been something we’ve been engaged in from the very start. Unfortunately, the whole scheme has been, in true HMRC fashion, marred by delays and confusion. Here’s what we know as it stands today.
MTD VAT MTD VAT is being offered to all businesses voluntarily registered for VAT for their first VAT return period starting on or after the 1st of April 2022.
HMRC has reported that around 100,000 businesses that should already be complying with MTD VAT have still to sign up. HMRC recently sent out a chase letter. It has the data on those not filling out their VAT using the correct method and wants as many businesses as possible ready to go fully digital.
Alongside HMRC’s new record-keeping and MTD filing requirements for VAT, there is also a new set of late filing and late payment penalty rules. The new rules were put into law by the Finance Act 2021. The penalties now work around filing obligation dates, imposing penalty points for when a business misses a filing obligation date. Points don’t mean prizes, they mean fines. But good behaviour can go some way to getting rid of points over time.
MTD SELF-ASSESSMENT Unlike MTD VAT, the start date for MTD self-assessment is in secondary legislation. Following a consultation published late last year, the start date is almost certainly going to be 6 April 2023 and will apply to unincorporated businesses and landlords with total business or property income above £10,000 per year. Quarterly reports are likely to require quarterly totals under headings following the self-employed pages of the traditional ITSA tax return.
The first accounting periods to be affected by MTD ITSA will be those beginning on or after 6 April 2023. The first quarterly reports will be those due for businesses using financial year accounting, so for the quarter 6 April 2023 to 5 July 2023.
Quarterly reports will be needed for each business a taxpayer has, which includes each property business, and also a rent- a-room business.
Note that the pilot for MTD ITSA is ongoing but remains fairly restricted. It is currently only to taxpayers who are: • UK resident • registered for self-assessment with all returns and payments up to date
AUGUST 2021
• a sole trader with income from one business only or a landlord who rents out UK property (or both). • not reporting income from any other source.
People often ask me how taxpayers will report income other than from trading and property. HMRC’s expectation seems to be that most MTD software will allow non-MTD income to be reported. It is also building a new service to allow non-MTD income to be reported separately.
WHAT ARE THE ONCOMING THREATS TO PH OPERATORS? ANSWER: ‘CONTINUITY’ IN PH AND DRIVER RETENTION
In England and Wales, tax checks will be conducted on any new applications for PH licences. If there’s a time to take the your drivers’ tax seriously, it’s now. Contact us about this now.
HMRC will introduce checks on tax registrations for all renewed applications in England and Wales. This includes applications to drive taxis and PHVs, and applications to operate a private hire business. This is being called ‘conditionality’, as entry to the private hire trade (through licensing) is now conditional on tax checks.
Licensing bodies and local authorities will need confirmation from HMRC that applicants have passed the check before being given a renewed licence.
HOW WILL IT AFFECT THE PRIVATE HIRE INDUSTRY? HMRC is doing this as a response to the hidden economy, which they believe exists as a result of confusion and lack of understanding about tax obligations. Making access to licences conditional on a tax check certainly makes it more difficult for people to enter or remain as part of the hidden economy. It also creates a more transparent industry.
According to HMRC, licensing bodies will signpost first-time applicants to HMRC guidance about tax obligations. This is to obtain confirmation that they are aware of what is expected of them before considering the application.
The tax check will be carried out by providing enough information for HMRC to be satisfied that the applicant is aware of their tax obligations and willing to adhere to them. If the licensing body is unable to obtain confirmation of tax check completion for 28 days, licences will either be denied or will be allowed to expire.
Confused? You will be, or come to our seminars at the PHTM EXPO 2021, on the 14 and 15 September at ArenaMK.
Gary Jacobs, The Eazitax Group
eazitax.co.uk
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