HMRC digital accounts and quarterly reporting (MTD) – update November 2016

HMRC digital accounts and quarterly reporting (MTD) – update November 2016
9th November 2016 Debbie

Following on from my article in May in relation to the above. My earlier articles – February and May – can be found in my earlier blogs.

Since my last blog 6 consultation documents have been issued by HMRC, in August 2016; that covered the following:

  • Bringing Business Tax into the Digital Age – how digital record keeping will operate and confirmation that only summary data will be required;
  • Business Income Tax – Simplifying Tax for Unincorporated Business – extending the cash basis of accounting and reducing reporting requirements;
  • Business Income Tax – Simplified cash basis for Unincorporated property businesses – extending the cash basis of accounting and simplifying arrangements for Landlords;
  • Voluntary Pay As You Go – this is intended to be a voluntary arrangement and businesses will not be required to pay more regularly unless they want to.
  • Tax Administration – framework to underpin compliance with MTD and ensure there are fair and proportionate penalties; and
  • Transforming the Tax System through Better Use of Information – how HMRC will make better use of information received from third parties – eg banks/building societies, employers, to provide a more transparent service.

HMRC held webinars in September and October for Tax Agents, which I attended, to canvass feedback on their proposals. Also talks were had with ICAEW (Institute of Chartered Accountants) and CIOT (The Chartered Institute of Tax) – who also canvassed feedback from members – which I provided.

The consultation closed on 7 November

Originally HMRC were to be providing free software for clients. Now they are expecting free software to be provided by software houses for the most simple of cases.

In the discussions there is talk of HMRC looking at the feasibility of using spreadsheets to deliver the objectives of MTD.

HMRC are currently focusing on unincorporated businesses, as it is intended that MTD will come into effect for them from 6-4-18. Further information on MTD for incorporated businesses will follow – it is intended MTD will come into effect for them from 1-4-20.

It is proposed that unincorporated businesses will have a deadline of calculating the taxable profits of the business of 9 months from their period end – as a lot of unincorporated business produce accounts to 31 March or 5 April – this could well cause problems over the holiday period of Christmas and New Year!

There has been much comment on the proposed exemption from MTD for Sole Traders and Landlords with turnover of less than £10,000. It is considered that this is too low. Consider if someone had turnover of £14,000, but taxable profit of £9,000 and no other income…………..they would not be a tax payer but still be caught by MTD!

For individuals MTD will mean that HMRC will make more use of third party information it holds and the process will become a checking exercise of information held by HMRC, rather than submitting a detailed tax return……………… it could herald the death of the tax return!

So it is still a question of wait and see!

  • Will the exemption be raised from a turnover of £10,000?
  • Will there be delays to the implementation dates?
  • Will HMRC accept summary information on excel spreadsheets?
  • What will free software look like?
  • Will the annual tax return end as we know it? And when?


Debbie Wicks

Friston Wicks; Chartered Accountant and Chartered Tax Adviser