01/02/2017
Making Tax Digital: quarterly reporting requirements for landlords and self employed
HMRC has confirmed the timetable for the rollout of quarterly reporting and a year end reconciliation under Making Tax Digital with the first tranche of taxpayers, including buy-to-let landlords and the self employed, set to kick in from April 2018
31 Jan 2017
Sara White
Sara White
Editor, Accountancy and CCH Daily
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The changes will affect most businesses, including micro and small businesses. This includes over three million self-employed individuals (including around 900,000 buy-to-let landlords), 1.6m companies, over 400,000 ordinary partnerships, and about 600,000 businesses with income from different sources (for example, both self-employment and property).
The requirement for quarterly reporting and a subsequent year end reconciliation will be mandatory for all businesses by 2021, although the introduction is being staggered depending on the size of business so that larger incorporated businesses will not be drawn into the system before 2019 at the earliest.
Quarterly reporting for landlords and the self employed will start from 6 April 2018 although the threshold of £10,000, suggested in the original proposal documents, is still up for review, with the government yet to confirm whether this will be raised to exclude more of the smallest unincorporated businesses and sole traders. This arbitrary figure has come in for criticism as it is even below the current tax free threshold for individual taxpayers.
There is also some discussion about whether the deferral threshold will also be changed which would give a one-year exemption to some businesses.
A decision on both threshold issues will be made by the middle of the year at the latest, but it will definitely have to be taken before the Finance Bill 2017 is laid in July. There is likely to be more consultation on this particularly complex issue.
Theresa Middleton, HMRC director of Business Customer and Strategy told CCH Daily: ‘We have not included the exemption threshold and deferral threshold as the government has decided that it needs more time to consider these issues, but they will be confirmed before July 2017 when the legislation is laid.’
From next year – 6 April 2018 - businesses, self-employed people and landlords will be required to start using the new digital service. The key dates are:
April 2018 if profits chargeable to income tax and pay Class 4 national insurance contributions (NICs);
April 2019 if registered for and pay VAT; and
April 2020 for corporation tax payers.
Individuals in employment and pensioners will be exempt from digital tax reporting unless they have secondary incomes of more than £10,000 per year from self-employment or property.
In the consultation, the government said that it was considering exempting more of the smallest unincorporated businesses from the requirement to keep digital records and report earnings.
It was also considering deferring the mandatory start date of Making Tax Digital (MTD) by one year for the next tier of small unincorporated businesses and landlords with annual incomes of above £10,000, but below a threshold to be determined. Final decisions will be made before legislation is laid later this year.
