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Making Tax Digital (MTD)

The Government has shelved its controversial plans for ‘Making Tax Digital’ by removing provisions from the 2017 Finance Bill (shortly before the June 2017 snap election). There was always a fair amount of uncertainty. Now we are sure something will happen sometime – we just don’t know what or when! We await developments…

For the record what follows reflects the proposals before the rethink. You will see in the ‘Opinion’ section of our Budget Comment March 2017, we had reservations (as did most of the profession).

Now

All individuals can access their Digital Tax Account now (and have a fair amount of functionality). Have a look: www.gov.uk/personal-tax-account

From 6 April 2018

All self employed or property landlords with gross income over £85,000 will need to report quarterly.

From 6 April 2019

All self employed or property landlords with gross income between £10,000 and £85,000 will need to report quarterly.

Otherwise

The last ‘Self Assessment’ Tax Return (for some) will be for the year ended 5 April 2018.

  • The new system will apply to Companies and Trusts as well as individuals.
  • Agents should have access to their clients’ Digital Tax Account in due course (with fresh client authority).
  • We await clarification on:
    o Digitally excluded clients
    o Basis Periods and adjustments for self-employed
    o Complex personal cases
    o Calculating the effect of a pension contribution
    o Foreign Income, Capital Gains, Residence, Remittance Basis
    o Carry back reliefs (eg EIS Income Tax and CGT reliefs)
    o Extension of cash basis rather than accruals for property income
    o Tax administration, penalties, deadlines

Opinion

As you will have gathered there is a lot to be clarified! If you want our opinion, the new system is good in principal and will suit taxpayers who are both interested and competent…

The whole project is probably too ambitious and the architects of MTD just don’t get the complexity in the nooks and crannies all over the tax system. Neither do they get peoples’ general lack of engagement with (or worry about) the tax system. It is a hasty and unnecessary replacement of the logical and efficient Self Assessment system.

In some cases there will be quarterly involvement of professionals and HMRC haven’t adequately considered the associated cost!

I’d say the DTA should be operated as a tool for Self Assessment rather than as a new system – probably for the next 20 years (until the digital generation have fully taken over!).

The comments above are brief highlights and each item is subject to change, please note the full chart of Rates and Allowances on our budget pages and remember – there is always more to it than meets the eye so please contact us before taking or refraining from action.