The Seminar Tour starts this week! Reply

The government may have postponed Making Tax Digital but the Seminars continue.

The first one is this Friday (1st September) in Bristol, its an epic production.

6 Hours of CPD

110 PowerPoint Slides

229 pages of handouts

The seminar has 7 sections

  • HMRC MTD route map
  • The Requirements of MTD
  • Client transition planning and client communications
  • How will MTD change the way clients work with accountants
  • Case Studies
  • Software
  • Sanctions & Penalties

With contributions from Xero, Sage, MyFirmsApp, Free Agent, BTC, Practice Track and Clear Books

This is probably one of the most comprehensive seminars ever given on Making Tax Digital

Click here to find out about the seminars in Cambridge, Manchester and London.

I look forward to seeing you there

steve@bicknells.net

The Second Finance Bill 2017 changes the timetable for Making Tax Digital – what are we doing now? Reply

The previous timetable for Making Tax Digital was

  • April 2018 – quarterly reporting for income tax purposes for unincorporated businesses with a turnover over £85,000
  • April 2019 – quarterly reporting for both incorporated and unincorporated businesses for income tax and VAT
  • April 2020 – quarterly reporting for corporation tax purposes

The new timetable will be

  • Only VAT registered businesses will need to keep digital records and only for VAT purposes.
  • They will only need to do so from April 2019.
  • Businesses will not be asked to keep digital records or update HMRC quarterly for other taxes until at least April 2020 (the original dates had implementation from April 2019).

If you are VAT registered then you will need to move to digital record keeping (i.e. use software to record all your VAT invoices and receipts).

This is massive change in timetable and one that many small businesses and landlords will welcome.

Whilst this now gives smaller businesses longer to prepare, MTDfB is still coming in 2020 and expected to require unincorporated businesses to report the information noted below, so its still worth starting preparations and using cloud based accounting systems.

The details below are an extract from gov.uk for Quarterly Reporting

Non-property businesses

Income:

  • turnover, takings, fees, sales or money earned
  • any other business income

Expenses:

  • cost of goods bought for resale or goods used
  • construction industry – payments to subcontractors
  • wages, salaries and other staff costs
  • car, van and travel expenses
  • rent, rates, power and insurance costs
  • repairs and renewals of property and equipment
  • phone, fax, stationary and other office costs
  • advertising and business entertaining costs
  • interest on bank and other charges
  • bank, credit card and other financial charges
  • irrecoverable debts written off
  • accountancy, legal and other professional fees
  • depreciation and loss/profit on sale of assets
  • other business expenses
  • goods and services for your own use
  • income, receipts and other profits included in business income or expenses but not taxable as business profits
  • disallowable element for each category

Property businesses

Income – furnished holiday lettings:

  • rental income and any income for services provided to tenants

Expenses – furnished holiday lettings:

  • tax taken off income
  • rent paid, repairs, insurance and cost of services provided
  • loan interest and other financial costs
  • legal, management and other professional fees
  • other allowable property expenses
  • private use adjustment
  • premiums for the grant of a lease
  • reverse premiums and inducements
  • property repairs and maintenance
  • costs of services provided, including wages

Income – property:

  • rental income and other income from property

Expenses – property:

  • tax taken off any income from total rents
  • premiums for the grant of a lease
  • reverse premiums and inducements
  • rent, rates, insurance, ground rents etc.
  • property repairs and maintenance
  • loan interest for residential properties and other related financial costs
  • other loan interest and financial costs
  • legal, management and other professional fees
  • costs of services provided, including wages
  • other allowable property expenses
  • private use adjustment

To find out all the latest information why not come to one of my seminars

steve@bicknells.net

What information will you need to report under Making Tax Digital (MTDfB)? Reply

Once the election is over, Making Tax Digital will be pushed forward again, ready for its launch in April 2018.

If you aren’t using any software or apps to prepare your accounts, now is the time to start. Under MTDfB – Making Tax Digital for Business – Sole Trader, Partnerships, Landlords and ultimately Companies will need to file returns every quarter and submit a final year end return.

This what you will need to report

The categories of information listed below are being reviewed and have not yet been finalised. They have been included mainly for indicative purposes.

https://www.gov.uk/government/publications/bringing-business-tax-into-the-digital-age-legislation-overview/bringing-business-tax-into-the-digital-age-legislation-overview#schedule

Non-property businesses

Income:

  • turnover, takings, fees, sales or money earned
  • any other business income

Expenses:

  • cost of goods bought for resale or goods used
  • construction industry – payments to subcontractors
  • wages, salaries and other staff costs
  • car, van and travel expenses
  • rent, rates, power and insurance costs
  • repairs and renewals of property and equipment
  • phone, fax, stationary and other office costs
  • advertising and business entertaining costs
  • interest on bank and other charges
  • bank, credit card and other financial charges
  • irrecoverable debts written off
  • accountancy, legal and other professional fees
  • depreciation and loss/profit on sale of assets
  • other business expenses
  • goods and services for your own use
  • income, receipts and other profits included in business income or expenses but not taxable as business profits
  • disallowable element for each category

Property businesses

Income – furnished holiday lettings:

  • rental income and any income for services provided to tenants

Expenses – furnished holiday lettings:

  • tax taken off income
  • rent paid, repairs, insurance and cost of services provided
  • loan interest and other financial costs
  • legal, management and other professional fees
  • other allowable property expenses
  • private use adjustment
  • premiums for the grant of a lease
  • reverse premiums and inducements
  • property repairs and maintenance
  • costs of services provided, including wages

Income – property:

  • rental income and other income from property

Expenses – property:

  • tax taken off any income from total rents
  • premiums for the grant of a lease
  • reverse premiums and inducements
  • rent, rates, insurance, ground rents etc.
  • property repairs and maintenance
  • loan interest for residential properties and other related financial costs
  • other loan interest and financial costs
  • legal, management and other professional fees
  • costs of services provided, including wages
  • other allowable property expenses
  • private use adjustment

Partnerships

Interest and alternative finance receipts without UK tax deducted:

  • interest and alternative finance receipts from UK banks and building societies paid without tax deducted
  • interest distributions from UK authorised unit trusts and UK open-ended investment companies and investment trusts
  • income from National Savings and Investments
  • other untaxed income from UK savings and investments (except dividends)

Interest and alternative finance receipts with UK tax deducted:

  • other taxed income from UK savings and investments (except dividends) (amount net of tax deducted)
  • tax deducted

Dividends:

  • dividends and other qualifying distributions from UK companies
  • tax credits attached to such dividends etc
  • dividend distributions from UK authorised unit trusts and open-ended investment companies
  • tax credits attached to such distributions
  • stock dividends from UK companies
  • tax credits attached to such stock dividends
  • non-qualifying distributions and loans written off
  • tax credits attached to such distributions etc

Other income received without UK tax deducted:

  • other income – profit
  • other income – loss

Other income received with UK tax deducted:

  • other income (amount net of tax deducted)
  • tax deducted

Partnerships – end of year information

Disposal of capital assets – partnerships:

  • description of assets
  • whether listed or unlisted shares or securities (if applicable)
  • name of partners who benefited from the disposal proceeds
  • total proceeds from disposal

End of year information

Tax adjustments and elections:

  • adjustment required where the basis period is not the same as the accounting period under section 203 of the Income Tax (Trading and Other Income) Act (ITTOIA) 2005
  • averaging adjustment applied to taxable profits where an election has been made for averaging under section 222 or 222A of ITTOIA 2005
  • adjustment required as a result of a change in basis under Chapter 17 of Part 2 of ITTOIA 2005
  • total of any construction industry scheme deductions taken from payments made to subcontractors under section 61 of Finance Act 2004
  • any other tax deducted from trading income (excluding deductions made by contractors on account of tax)
  • sums due to be charged under sections 277 to 285 of ITTOIA 2005
  • adjustments required under Chapter 7 of Part 3 of ITTOIA 2005
  • claims for loss relief under Chapter 2 of Part 4 of the Income Tax Act 2007 (Chapter 4 for property businesses)
  • disallowable expenditure
  • foreign tax deducted
  • any other tax adjustment
  • adjustment on change of basis
  • foreign tax deducted

Capital allowances – claims and balancing charges:

  • annual investment allowance
  • capital allowances at 18%
  • capital allowances at 8%
  • restricted capital allowances on cars costing more than £12,000 where bought before 6 April 2009
  • business premises renovation allowance
  • enhanced capital allowances: energy-saving relief
  • enhanced capital allowances: environmentally-beneficial relief
  • enhanced capital allowanced: electric charge-points
  • enhanced capital allowances: gas refuelling equipment
  • allowances on sale or cessation of businesses use (where an asset has been disposed of for less than its tax written down value)
  • total capital allowances
  • balancing charge on sale or cessation of business use (where business renovation allowance has been claimed)
  • balancing charge on sales of other assets or on the cessation of business use (where an asset has been disposed of for less than its tax written down value)

 

steve@bicknells.net

Making Tax Digital will see the end of VAT Returns Reply

Whilst we know that due to the election Making Tax Digital was dropped from the Finance Bill, we also know HMRC has said it will be back as soon as the elections are over!

The plan is that by 2019 VAT returns will be abolished for businesses including the Self Employed, Landlords and Partnerships.

But don’t start celebration too soon, they are being abolished because we will be providing more information each quarter online to HMRC.

Interestingly HMRC say they may be able to accept spreadsheets if they meet specific criteria, but realistically, surely everyone should now be using online accounting software. DIY spreadsheets are not the best way to keep your accounts and there is a high risk of error.

Why create your own spreadsheet when you can get software like Sage One Start for £6/mth or you might get an even better deal if you ask a Sage One Accountant.

So what is the expected timetable for Making Tax Digital

  • April 2018 – quarterly reporting for income tax purposes for unincorporated businesses with a turnover over £85,000
  • April 2019 – quarterly reporting for both incorporated and unincorporated businesses for income tax and VAT
  • April 2020 – quarterly reporting for corporation tax purposes

2018 is just the beginning as Sage explain …

What Making Tax Digital really means

  • All self-employed individuals, landlords and incorporated entities with business income over £10,000 will be required to keep digital records of all their income and expenditure and submit these records electronically to HMRC. Those in employment who have secondary income of more than £10,000 per year through self-employment or property will also be affected.
  • HMRC will not provide you with the tools for digital record keeping and submission. These will be offered through commercial software providers.
  • Those affected have the option to make the electronic submission in collaboration with their accountant or bookkeeper or can do this on their own.
  • Updates to HMRC will need to be made at least quarterly, taxpayers will have an option to pay tax based on their quarterly submissions, if they wish.
  • Any activity at the end of the year must be concluded and sent either by ten months after the last day of the accounting period, or by 31st January, whichever is sooner.

http://www.sage.co.uk/business-advice/legislation/making-tax-digital

The truth is, we don’t know exactly what the rules will be until the bill is drafted which won’t be till after the election, but what we do know is that big changes are coming!

steve@bicknells.net

Making Tax Digital – Sanctions for Late Submission and Late Payment Reply

Making Tax Digital is coming soon!

It will will eventually affect us all, businesses including property investors will have to initially file their accounts quarterly and then ultimately monthly.

For many this will be a huge shift from annual accounts and self assessment returns.

HMRC will be able to estimate your tax each time you submit a return.

The government have confirmed that taxpayers will be given a period of at least 12 months before they will be charged any late submission penalties in relation to their Making Tax Digital for Business obligations.

Making Tax Digital – sanctions for late submission and late payment is open for you to respond until 11 June. The consultation seeks views on three possible models for late submission penalties and provides an update on late payment penalty interest.

Model A – the Points Based System

Model B – Compliance Reviews with Penalties

Model C – Suspension with conditions

Read further details at https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/601136/Making_Tax_Digital_-_sanctions_for_late_submission_and_late_payment.pdf

steve@bicknells.net

Making Tax Digital – the Pilot has started! Reply

Whether you like it or not, Making Tax Digital is coming to us all!

HM Revenue and Customs’ (HMRC) ambition for most businesses to keep records digitally and send quarterly summary updates moves a step closer with the launch of the Making Tax Digital for Business (MTDfB) pilot.

In April, HMRC will invite some customers, both businesses and their agents to sign up for a new way to report income and expenses online. At different stages of the pilot customers will help HMRC develop and improve the new service by:

  • using accounting software to record their business income and expenses
  • sending summary reports of their income and expenses direct from their digital records quarterly or more often if they choose
  • signing up to go paperless

Based on the information they report, customers will get an estimated tax calculation.

As soon as the new service has been tested with the first group of businesses and agents, other customers will be able to join the pilot. These customers will be able to report their income and expenses for the quarter they join as well as any previous quarters.

Customers who aren’t invited to take part in the pilot at the beginning won’t be able to start sending quarterly reports to HMRC immediately, but they can:

  • start to use accounting software to keep their records if they don’t already

  • check with their software supplier, or agent, that any software they use is compatible with quarterly reporting

https://www.gov.uk/government/news/hmrc-launches-a-new-way-to-report-income-and-expenses-online

steve@bicknells.net

Will you be able to file your accounts every quarter? Making Tax Digital Reply

Making Tax Digital is a key part of the government’s plans to make it easier for individuals and businesses to get their tax right and keep on top of their affairs – meaning the end of the annual tax return for millions.

Can quarterly reporting be easier than annual reporting???

Digital tax accounts for all will mean the tax payer can see the information that HMRC holds and be able to check at any time that their details are complete and correct. HMRC will use this information to tailor the service it provides, according to each tax payers’ individual circumstances.

The top 5 common accounting problems accountants deal with are:
1. Not doing any accounts – the shoe box approach to business
This is the most common mistake, book keeping is best done as you go along, putting all the paperwork in a shoe box or carrier bag is a really bad idea as you have no idea how your business is performing.
2. Not keeping receipts. Often small business miss out on claiming all their expenses because they fail to keep receipts and lose track of their spending
3. Not reconciling. Reconciling your bank statements to your cash book is vital to make sure that all of your income and expenses have been recorded in your accounts.
4. Using the wrong accounting system. For some businesses a manual cash book and records are fine but for many accounting software such as Sage, Xero or Debitoor will be needed to keep track of debtors, creditors and VAT. Make sure you understand your accounting system and operate it correctly.
5. Mixing business and personal expenses. Some sole traders even mix up business and personal bank accounts and in extreme cases don’t even have a business bank account. This can cause errors and often means that a sole trader will either claim to many expenses or to few.

HMRC state:

We know that the majority of businesses, self-employed people and landlords want to get their tax right first time, but the latest tax gap figures show too many businesses are prone to making mistakes. The amount of tax not collected due to avoidable taxpayer errors and carelessness has risen to over £8bn a year. This not only costs the public purse – it also creates cost, uncertainty and worry when HMRC is forced to look into their affairs.

By 2020 most businesses, self-employed people and landlords will be required to keep track of their tax affairs digitally and update HMRC at least quarterly via their digital tax account.

These changes will be introduced for some businesses from April 2018, and will be phased in by 2020, giving businesses time to adapt.

One of the big areas of concern has been over the quarterly tax reporting requirements and concerns over data accuracy, as a result, the government has pushed back the start date for small business to April 2019.

Data accuracy is going to be critical, are most businesses up to providing data in real time? RTI has worked for payroll but could it really work for accounting information? many businesses rely on their accountants and book keepers to get the information correct.

It is expected that most modern accounting systems will be able to upload the quarterly results to HMRC or Agents could key the information directly into digital accounts. However, this will mean things like dividends will have to be declared in the correct period and not just at year end.

steve@bicknells.net

The future is Digital, but we aren’t ready to Make Tax Digital yet! Reply

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On 14 December 2015, HMRC published a “roadmap” showing that the new process known as ‘MTD Making Tax Digital’ would be mandatory for most businesses:

“By 2020 most businesses, self-employed people and landlords will be required to keep track of their tax affairs digitally and update HMRC at least quarterly via their digital tax account. These changes will be introduced for some businesses from April 2018, and will be phased in by 2020, giving businesses time to adapt.”

Accountant’s have been saying for sometime that 2018 is too ambitious and the £10,000 threshold is too low.

The House of Commons Treasury Committee now agree that 2018 is too soon and feel it should be 2019 or later.

One of the big areas of concern has been over the quarterly tax reporting requirements and concerns over data accuracy.

Data accuracy is going to be critical, are most businesses up to providing data in real time? RTI has worked for payroll but could it really work for accounting information? many businesses rely on their accountants and book keepers to get the information correct.

The relationship between UK Taxpayers and HMRC is a good one, the vast majority of UK taxpayers want to pay the right amount of tax and the UK tax gap is already one of the lowest in the world. HMRC could lose that trust by rushing MTD.

Software is also a big issue, with the threshold at £10,000 even very small businesses will need specialist software to cope with MTD and spreadsheets will not be able to cope.

It’s time to take a slower more considered approach.

steve@bicknells.net