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Public pilot of Making Tax Digital for VAT opens

Adrian Mooy - Monday, November 26, 2018


HM Revenue & Customs (HMRC) has opened a public pilot of Making Tax Digital (MTD) for VAT.
The pilot is open to sole traders and companies that are up-to-date with VAT, who have not received a default surcharge in the last two years.
Some other groups will need to wait to join, including those:
 • trading with the EU;
 • based overseas;
 • submitting VAT returns annually;
 • making payments on account;
 • using the VAT Flat Rate Scheme; or
 • who have never submitted a VAT return in the past will need to wait to join.
HMRC has also announced that a small number of the most complex businesses will have a six-month deferral to October 2019 before they need to comply with the requirements of MTD for VAT.
MTD for VAT will require businesses with turnovers of £85,000 or more to keep digital records and make quarterly digital submissions to HMRC using ‘designated software packages’ from next April.


Self-employed 'would back plans to expand pensions auto-enrolment'

Adrian Mooy - Monday, November 19, 2018


A survey carried out by insurance firm Prudential has suggested that over half of self-employed workers would back plans to expand pensions auto-enrolment, or make pension saving compulsory.


According to the survey, 27% of those polled would support the expansion of pensions auto-enrolment to cover the self-employed, and an additional 27% would back compulsory pension saving.


The survey also revealed that 18% of self-employed workers 'do not believe that pensions apply to them', while 20% stated that they find pensions rules 'very confusing'.


Furthermore, 28% of individuals surveyed reported that they will be reliant on the State Pension as their main source of retirement income.


Commenting on the survey, Vince Smith-Hughes, Head of Business Development at Prudential, said: 'It is clear that the self-employed want help in saving for retirement and that the State Pension alone may not be enough for a comfortable retirement.


'We believe it is important that the government works with the self-employed and the pensions industry to ascertain the most suitable option and put appropriate rules in place as soon as practicable.'

Making Tax Digital (MTD) for VAT

Adrian Mooy - Friday, November 09, 2018


HMRC is phasing in its landmark Making Tax Digital (MTD) regime, which will ultimately require taxpayers to move to a fully digital tax system. The first area to be affected by MTD will be VAT with the new rules being implemented from April 2019.


Under the regulations, businesses with taxable turnover above the VAT threshold (currently £85,000) must keep digital records for VAT purposes and provide their VAT return information to HMRC using ‘functional compatible software’. These new regulations take effect for VAT return periods beginning on or after 1 April 2019.


HMRC has published VAT Notice 700/22: Making Tax Digital for VAT. This Notice defines ‘functional compatible software’ and the transaction-level data that needs to be recorded and retained within the software.


Under the new MTD regulations, businesses will have to use ‘functional compatible software’. This means a ‘software program or set of compatible software programs which can connect to HMRC systems via an Application Programming Interface (API)’. This must be capable of:


 • keeping records in digital form as specified by the new rules


 • preserving digital records in digital form


 • creating a VAT return from the digital records held in compatible software and submitting this data to HMRC digitally


 • providing HMRC with VAT data on a voluntary basis


 • receiving, via the API platform, information from HMRC to ascertain compliance

HMRC delays late payments penalty reforms

Adrian Mooy - Wednesday, November 07, 2018


Planned reforms to HMRC’s penalty regimes for late submission and payment of tax due are to be further delayed while the department considers how best to communicate the changes, with papers published following the Budget indicating there are unlikely to be any change before April 2021 at the earliest.
The new penalty regimes for late payments of tax and late submissions of tax returns were originally expected to be introduced alongside Making Tax Digital for income tax from its original start date of April 2018 and would have affected a very large number of taxpayers.
Deferral of Making Tax Digital for income tax meant there was more time to refine the new penalty regime, which had attracted considerable criticism, but it still was not expected to be ready for the new deadline for Making Tax Digital for VAT, which is April 2019 and was predicted to commence from April 2020.
Now the Budget papers confirm that while the regime has been subject to consultation, it will not be implemented in the timescale originally foreseen.
The Overview of Tax Legislation and Rates (OOTLAR) document states: ‘The government consulted in summer 2018 on draft legislation for new late payment and late submission sanctions.
The government remains committed to the reform and intends to legislate in a future Finance Bill, to allow for more time to consider further the communications needed for successful implementation. ‘The government will provide notice before these measures are implemented.’
The Budget announcement means that the new regime will not now be in place until April 2021 at the earliest.
John Cullinane, CIOT tax policy director, said: ‘We are broadly supportive of these reforms to HMRC’s penalties regimes, so we are disappointed by this further delay, though as with any reform, we acknowledge that it is more important to do it right than to do it quickly.
‘If HMRC say they need until April 2021 – or later - to implement these changes then we will take them at their word and make the best use of the extra time to work with them on the details of the new regimes and publicity around their introduction.’
HMRC has indicated that it wants to introduce a two-tier penalty system which would kick in 15 days after a late payment.
Penalties will be calculated on debts remaining due after 15 days from the payment due date although on a mitigated basis where payment is made or a Time to Pay arrangements (TTP) has been set up until 30 days after the due date.
Where a successful TTP agreement is made, the government will take the date of contact with HMRC as the effective date for the purpose of late payment penalties.
If a payment or TTP is made or treated as made within 15 days of the due date no penalty will be charged; between 16 and 30 days half a penalty will be charged; and after 30 days a full penalty will be charged plus a further penalty which will then accrue daily until payment is made or a TTP treated as made.


Cullinane pointed out the penalty regime will now not be in place until at least two years after Making Tax Digital becomes mandatory for VAT, meaning the VAT default surcharge regime will remain in place for 2019/20, and may well also continue for at least 2020/21 and maybe even beyond that.
‘The existing penalty regime for VAT is not well suited to Making Tax Digital, and we are concerned around the complexities and administrative burdens that will result. The penalty point model being proposed for late submissions will work better with the Making Tax Digital reporting system.
‘With Making Tax Digital for income tax not coming in before April 2020 at the earliest, it would make more sense now, given that there is this delay, for the new penalty regime to be brought in at the same time for all taxes.
‘We hope HMRC will take the opportunity to do this. It is nonetheless disappointing that there has been a failure to deliver these changes effectively from the outset,’ he said.


HMRC urges taxpayers to complete self-assessment tax returns early

Adrian Mooy - Tuesday, November 06, 2018


With less than 100 days until the online self-assessment tax return deadline, HMRC is urging taxpayers to complete their tax returns early, in order to avoid the last-minute rush.


The deadline for submitting your 2017/18 self-assessment tax return online and paying any tax you owe is 31 January 2019.  An automatic penalty of £100 will apply if your return is late.


HMRC revealed that more than 11 million taxpayers completed a self-assessment tax return last year, with a total of 10.7 million finalising their returns on time. 758,707 individuals filed their returns on 31 January, the deadline day.


According to HMRC, a record 93% of taxpayers filed their tax returns online. Paper self-assessment tax returns must be filed by 31 October 2018.


Commenting on the matter, Angela MacDonald, Director General for Customer Services at HMRC, said: 'We want to help people get their tax returns right – starting the process early and giving yourself time to gather all the information you need will help avoid the last minute, stressful rush to complete it on time.'