Tax return changes

Having run a VAT registered business for 10 years I was actually glad it was quarterly as when year end came, the accounts were up to date for the tax return. If you keep your records up-to-date properly there is no need for a big rush (or careful preparation, whatever that means..) at the end of the year.

My deep regret is that I won't be spending Christmas finalizing my tax return as I have done for the last 15 years...

Presumably the banks and share registrars won't like it as they'll have to do the tax reports 4 times a year - or is that part staying as is?

I'm quite confused about how this is going to work. I understand it is so the tax office can ask for the tax payment quarterly and therefore improve its cash flow.
I receive a salary and a pension as well as my rental income. I get annual P60s for those. How is the tax office going to know what tax rate to charge me before those have been produced?

Reply to the comment left by "Alison King" at "30/12/2015 - 19:49":

Hi Alison, well, presumably that will either remain annual or your employers will have to produce these quarterly. That really would be a problem for them so I am guessing it's just the non-PAYE income that will be affected.

We will have to watch the space...

Hi Alison
The details are not known get exactly how it will work.
However, the employment income will be know to HMRC as your employer will advise them monthly or weekly.
You will have to advise on other income each quarter at least and work out the amount taxable. If you can't work it out you will need help and this will cost you more. Tax will be paid more regularly closer to the point of the income arising.
Problem is, some peoples tax is quite complicated. To get get correct taxable profits needs derailed work. Plus some make all sorts of entries on their returns. It's another burden we could do without.
This could be avoided. HMRC can just be paid sooner or more frequently yet I daresay this may end up hard and costly to administer. The payments can be based on prior year figures as it is now but paid sooner.
Steve

Reply to the comment left by "Steve Wood" at "30/12/2015 - 23:10":

Yes like many systems, it's all fine and dandy if you have straight forward, vanilla affairs, but if your case is more complex the system comes unstuck, and this type of scenario often isn't taken into account.

This will mean also that the "Clause 24" levy will be due more regularly and you can have fun waiting for your lenders to produce a yearly statement that contradicts your previous quarterly returns and puts you in line for a tax investigation, followed by a penalty notice.

Happy New Year!

I simply can't get my head around this one. I pay in advance anyway. I will pay my first instalment this January for 2015-2016 based on my 2014-2015 accounts. The system was changed about thirty years ago and I had to pay two years in one year to catch up.

I don't understand how my accounts can be done quarterly when most of my claimable expenses are in August, sometimes up to half my gross income. I realise inland revenue reimburse but my mind boggles at all the complications which will arise. Surly this can't be serious!

Please can anyone tell me more?

Is this accurate quarterly details or approximate details with accurate end of year details?

If we can do cash basis during the year and accruals basis at year end, then not too onerous.
If we have to do accruals basis everywhere, then a right pain.

I maintain separate accounts for each property which have to be consolidated for overall P&L and for tax purposes; the consolidation is significant effort.
Also all the income and expenditure items need to be apportioned between the accounting periods, such as rent, mortgage, letting agent fees, insurance, flat management fees, gas, electric, water. Plus bills that have been received but not yet paid.
I would have to make significant changes to my accounting processes to do quarterly consolidations and then work out the annual position (and I would have to buy another accounts book just to hold all those extra P&L accounts!).

Hi Yvonne & Michael
The exact details of how it will work are not known yet. However, it is not as easy as HMRC / GO would try to lead people to believe. In fact it would be very difficult for people to do this as tax is complicated with many events that can take place in a tax year . I suspect accuracy would be expected in the calculations and of course late submissions will be another penalty opportunity. They love a penalty!
Even with up to date records this process can involve much more work for everyone. However, unless these unworkable plans are properly considered (maybe increased payments on account frequency will suffice?) & are simplified we will all find out to our cost - more admin/ costs and more pressure on earning a living.
The petition target of 100,000 has been reached but we know these are ineffective as we get the same people saying the same ill informed nonsense. You only have to look at the Clause 24 responses to see this is a copy and paste time from people who lack the understanding or are not allowed to say anything other than the partly line.
Kind regards
Steve

Having looked at the Government proposals (prompted by the response to the petition) it does not seem that bad IF the Government deliver on their promise to make suitable free software available.

The proposals appear to be

  - A digital tax account where information can be entered throughout the year.
  - Joined up HMRC systems so that things we currently have to enter on tax return are entered automatically (e.g. interest earned, dividends, PAYE, state benefits).
  - Businesses must keep computerised financial records (not unreasonable in my opinion)
  - Free software to be available for keeping financial records
  - Free (and commercial) software to include facilities so that user just "presses a button" and the required data are passed to HMRC

So, provided that the free software allows us to maintain accounts that meet our business needs, this should indeed not require additional effort (other than remembering to "press the button" periodically).

It seems likely (to me) that for fully-managed properties, the letting agent will maintain the required information and will be able to update HMRC, so avoiding the need for some landlords to 'go digital'.

The following are my current business needs, which I would expect the free software to handle; I am sure other people (e.g. HMO landlords) have different needs:

  - Ability to handle and consolidate single-owner properties and joint-owner properties.
  - Ability to have both property-specific accounts and non-specific accounts (e.g. telephone is not specific to a property).
  - Ability to provide Profit and Loss statements at any time for each property.
  - Ability to produce end-of-year accounts: Profit and Loss account; Balance Sheet
  - Ability to maintain accounts on Accruals basis (i.e. apportion an entry to different accounting periods, such as rent received part of which is for one tax year and part for the next).