Quarterly Tax Returns for Landlords?

There was a big uproar following last year’s Autumn Statement, in which the then-Chancellor George Osborne outlined plans to “Make Tax Digital” for the self-employed and small businesses by 2018.

It sparked a great deal of concern from many sectors, and a petition to reverse the plans reached over 114,504 signatures leading to a debate in Parliament.

The outbreak of fear surrounding the announcement centred on the idea of mandated quarterly tax returns. Since the announcement, the Government has been doing its best to clarify the difference between tax returns and the quarterly “updates” it envisions for its “Making Tax Digital” scheme.

Outlines for their planned revolution in tax can be found here.

The plans that were announced last year affecting landlords are now being consulted on (closing 7th November):

  • Digitisation of the tax system, with the self-employed, small businesses and landlords needing to keep digital records and use software to update HMRC quarterly
  • Unincorporated businesses with an annual income of under £10,000 will be exempt
  • Landlords with income above that threshold may be able to defer for a year
  • Giving unincorporated landlords the choice to use the cash basis rather than the accruals basis

Widespread Opposition

Although many details still remain to be explained, the Government has assured opposition that the updates will not amount to tax returns, but will involve submitting income/expenditure information in summary at least quarterly. However, there is still widespread opposition to planned timetable and other aspects of the project.

The independent HMRC oversight body, the Administrative Burdens Advisory Board (ABAB), refused to endorse the changes, believing that mandating them from 2018 will be too burdensome and there is a lack of time to educate businesses and provide them with the necessary tools.

At a recent Treasury Select Committee hearing on the digitisation plans, representatives from the Federation of Small Businesses, Institute for Chartered Accountants for England & Wales, and Association of Chartered Certified Accountants all shared concerns around the costs associated with the changes, the timescale and the lack of a proper impact assessment.

Consultation and the NLA View

The Government is now consulting on some more of the details of their plan, which is available here and closes on 7th November.

We urge landlords to respond to the consultation if they believe the outlined plans will adversely affect their business. The more evidence we can give HMRC, the greater chance they will listen.

In general, the NLA is supportive of plans to simplify tax and bringing it into the 21st century. However, we have a number of concerns and reservations that we have brought up in our response to the consultation:

  • We believe that the £10,000 income threshold for unincorporated property businesses should be raised
  • We have concerns with the workability of the software and IT systems and recommend a longer lead-in period before the scheme becomes mandatory for small businesses, the self-employed and landlords
  • There needs to be a backup option for those landlords who genuinely cannot take part, and sufficient financial and educational support to help landlords meet the deadline.

For more information about the NLA, visit www.landlords.org.uk

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