Taxpayers must make six submissions to HMRC
In March 2015, when George Osborne outlined the new concept of “making tax easier”, he said it would herald the death of the tax return. This was sold as a reduction in the administrative burden for taxpayers, but by the end of 2015 we were told that Making Tax Digital (no longer easier) would involve sending HMRC four updates per year.
I have now discovered that the tax return is not disappearing; it is merely changing its name, and that Making Tax Digital for Business will involve six submissions per year, not five as originally thought.
The new requirement will be to make periodic updates to HMRC, the financial information required to be transmitted in those updates will be specified in regulations. Those regulations have not been published yet, but HMRC has made it clear that the maximum period an update can cover is three months. Although a taxpayer may submit more frequently updates if they wish, anything more than quarterly updates will not be required.
End of period statement
The updates are not required to include any accounting adjustments, as those adjustments are to be included (if necessary) in an “end of period statement”. This is the fifth submission to HMRC. This end of period statement (EoPS) is the point at which the taxpayer declares they have submitted complete and correct information regarding their trade.
HMRC has said this deadline will be set at the earlier time of 10 months after the accounting period end or the next 31 January. As with quarterly returns, a separate end of period statement will be required for each trade or business undertaken by the taxpayer.
In addition to submitting the end of period statement the taxpayer will be required to make a “final declaration”. This is the new name for the annual tax return.
The final declaration is needed to report any income which has not been reported to HMRC through an ‘end of period statement’, such as savings or employment income, and to make any necessary claims. The deadline for submitting the final declaration is on or before; 31 January in the year after the end of the tax year.
Here’s what the changes mean to Pete, a sole trader…
Pete has a sole-trade business with a year end of 30 April, which has a turnover of £90,000 per year. He will start making quarterly reports under Making Tax Digital from the accounting period that begins 1 May 2018. His quarterly updates must be submitted within one month of the end of each three-month period that starts on 1 May, and the other declarations and statements must be submitted as follows:
We are still waiting for sight of the regulations which will specify the deadlines for submitting updates, statements and declarations to HMRC. It is possible that those regulations will change the deadlines from those outlined above.
What is clear is that a self-employed taxpayer will have to interact with HMRC at least six times a year to submit or confirm the following:
- 4 updates (per trade/business)
- 1 End of Period statement (per trade/business)
- 1 Final Declaration.
So much for making simplifying and making tax easier for small businesses!
If you have any questions, or you are not getting the support and advice you need, speak to us at ESP Business Solutions. We will help you every step of the way and use our expertise to take the stress out of making tax digital.