Tax Administration
Making Tax Digital
‘Making Tax Digital’ (MTD) is a planned reform of the administration of tax that will replace the annual tax return system with online quarterly reporting. This will have a huge impact on taxpayers and on HMRC. According to the original Government plan, it was to apply to nearly all individual landlords and self employed people from 6 April 2018.
The Chancellor has responded to a great many objections that it would not be possible to introduce such a major change in such a short time and with so little testing: only those self employed businesses and landlords with turnover greater than the VAT registration threshold (£85,000 for 2017/18) will be required to make quarterly online reports for Income Tax purposes from April 2018.
The new plan is for all those with turnover above £10,000 to be brought within MTD for Income Tax for 2019/20, and also for MTD to apply to VAT reporting by VAT-registered traders at the same time. Corporation Tax is to be brought into the system from April 2020.
Avoidance and evasion
As usual, the Chancellor announced a number of measures to ‘strengthen tax avoidance sanctions and deterrents’. These include a new penalty for people who enable the use of tax avoidance arrangements that are later defeated by HMRC, revisions to penalties for participating in VAT fraud, and requirements for those with undeclared offshore income or gains to put their affairs in order or face harsher penalties from October 2018.
Hidden economy
Following consultation and an announcement in the Autumn Statement, the Government will develop further proposals on ‘conditionality’ – making access to licences or services (such as water or power) for businesses conditional on those businesses being registered for tax. This is considered a good way to tackle the hidden economy. The Government recognises that conditionality must also minimise burdens for compliant businesses and providers of the relevant licences or services.
Further proposals include stronger ‘failure to notify liability’ penalties and increased monitoring of taxpayers found to be operating in the hidden economy to keep them compliant. An implementation date for these proposals has not been given.