On 31st January, HM Revenue & Customs (HMRC) published new information about its Making Tax Digital project, designed to futureproof the UK tax system and decrease the gap in taxes collected from small businesses and landlords.
This is a £2bn pound project and expected to bring in an additional £6bn in taxes per year.
As a result of extensive consultation, having received more than 3,000 responses in the last eight months, HMRC has released its vision for digitising the tax system, millions of businesses to will have to file quarterly tax returns starting April 2018.
To provide greater clarify, HMRC confirms that taxpayers will be able to do the following within the Making Tax Digital programme:
· - Self-employed professionals and property landlords with a turnover less than £10,000 a year will not be forced to keep digital tax records, although they can do so if they wish
· - HMRC will extend the ‘cash in, cash out’ basis for income and expenditure for an additional 2.5 million self-employed firms and unincorporated landlords
· - Charities will not be forced to maintain digital or quarterly tax records
· - Businesses unable to go digital with their tax reporting will not be legally forced to do so
· - Taxpayers will have a minimum of 12 months to familiarise themselves with the digital tax system before any penalties for late tax returns are applied
This is the single most significant change is how tax liabilities are assessed for rental property owners and small businesses with a turnover in excess of £10,000 and actions should be taken to prepare for these changes next year. We at Tax Assist can assist with this transition planning .
Q:I missed the 31st January deadline for filing my self-assessment tax return – can I stop HM Revenue & Customs (HMRC) from issuing any penalties?
A:There are some circumstances when HMRC may consider waiving them. If you believe you’re not required to submit a tax return, you should talk to HMRC and ask for it to be withdrawn. If HMRC agrees, you won’t have to file a return and any penalties issued should be cancelled. The penalties escalate the longer the delay so you should file your tax return as quickly as possible – preferably online, as this will be fastest method and has a more recent deadline than 31st October for paper tax returns. Once you submit a late tax return, you can expect to receive a late filing penalty. If you have a good reason for the delay in filing your return, you may be able to appeal against the penalty.
These are known as ‘reasonable excuses’ and typically mean that something unexpected or outside your control prevented you from meeting a tax obligation.
HMRC give these examples of Reasonable Excuses on its website:
· The death of your partner or another close relative shortly before the tax return or payment deadline
· You had an unexpected stay in hospital that prevented you from managing your tax affairs
· You had a serious or life-threatening illness
· A fire, flood or theft prevented you from completing your tax return
If you’re struggling to keep on top of your tax affairs, call your local TaxAssist Accountant on 01323-737770 and they will be happy to take care of them on your behalf.
Q:I have noticed that I made a mistake on the tax return I submitted on 31st January – am I able to amend it?
A:If you make an error on your tax return, you normally have 12 months from 31st January after the end of the tax year to correct or amend it. For example, if you filed your 2015/16 online tax return by 31st January 2017, you have until 31st January 2018 to amend it. You can only amend your return after this timeframe if you received your return late (after 31st July). If you owe more tax or need to pay a penalty because of the mistake, HM Revenue & Customs (HMRC) will notify you how much you need to pay and when and how to pay it. If you believe you are due a refund, you can tell HMRC how you would like to receive it.
If you submitted your tax return online, you can also amend it electronically. And if you chose to file it as a paper copy, there is no need to resend in the whole tax return. Just write to HMRC and attach the pages you want to make corrections to.
If you find preparing your tax return a chore, please feel free to call your local TaxAssist Accountant on 01323-737770 and they will be happy to complete it for you. This should ensure your return is accurate and prepared in good time; and your TaxAssist Accountant will also discover any tax saving opportunities.
Q:I filed my tax return on time, but I cannot afford to pay my tax bill. What should I do?
A:Your balancing payment for this year (2015/16) and if applicable, an instalment for next year (2016/17) are due by 31st January 2017, together with your tax return. If you cannot pay your tax bill, you should call HM Revenue & Customs’ (HMRC) Business Payment Support Service (BPSS). HMRC will ask you questions about your income and expenditure, assets and what you’re doing to get your affairs in order. If they think you genuinely cannot pay your tax they may grant you an extension to settle your taxes in or agree a payment plan. However, HMRC will not reduce the amount outstanding and they will still charge you interest.
If you don’t think you can afford to pay your tax bill, you should do the BPSS as quickly as possible, as they tend not to look so favourably on taxpayers who have already missed the deadline. If they do grant you an extension you will be expected to set up a direct debit. You must keep these payments up to date and pay your other tax. If you don’t, HMRC will normally cancel the arrangement and take legal action against you straight away.
If you don’t feel confident in negotiating with HMRC, feel free to contact your local TaxAssist Accountant who would be happy to liaise with HMRC on your behalf.