the advisor
Making Tax Digital and the driver issue
W
ELL, IT’S COMING TO THE to deliver. The whole MTD scheme has been end of the tax return season. marred by delays and confusion. Here’s MTD Many of you late guys may have as it stands today: heard that you now have until February to do your returns. However, be aware MTD for VAT you will pay interest on late payments (that MTD VAT is being offered to all businesses wasn’t in the HMRC press release of course!). voluntarily registered for VAT for their first VAT You may have heard me say many times that return period starting on or after April 1, 2022. Gary Jacobs in the very near future, sole trader drivers can HMRC has reported that around 100,000 no longer just turn up once a year with a box of businesses that should already be complying Gary Jacobs receipts when MTD digitises the tax process. We with MTD VAT have not signed up yet. runs Eaziserv, an will have to do returns every quarter with a fifth Alongside HMRC’s new record-keeping and accountancy firm final return at the end. MTD filing requirements for VAT, there is also a specialising in It is due to go fully live on 6 April 2024 for sole new set of late filing and late payment penalty the taxi and private rules. The new rules were put into law by the traders after the government postponed the hire business scheme by a year in September 2021. Finance Act 2021. The penalties now work This will happen (the pilot has been going on around filing obligation dates, imposing penalty eaziserv.co.uk since 2018), but not without a lot of pain and points for when a business misses a filing torment, with tens of thousands expected but obligation date. In this case points do not mean just nine people currently taking part in the pilot scheme. prizes, they mean fines. Professional bodies are calling for more information on how HMRC plans to get it right in time. MTD for tax returns As MTD’s first accountancy practice (Eazitax in effect Following a consultation published late last year, the turned the on button to the portal), we have been immersed start date is almost certainly April 6, 2024. It will apply to in it from the very start. At first, it felt like a massive unincorporated businesses (that’s sole traders to you and futuristic shift, like moving from vinyl to Spotify. me) with total business income above £10,000 per year. But, after all talk and no action for five years, it now is There will be quarterly reports which will look similar to more like the government’s version of hide and seek. A the self-employed pages of the traditional tax return. The Freedom of Information request from a top 20 firm just first accounting periods affected by MTD for self-assessment reported in the Financial Times revealed the dramatic fall in will be those beginning on or after April 6, 2023. MTD pilot participants. Note that the pilot MTD for self-assessment is ongoing but The test scheme’s first year in 2018/19 saw 877 people restricted to: u UK residents registered for self-assessment with all register for the pilot, but that number has now plummeted, returns and payments up to date as confirmed by HMRC. u A sole trader with income from one business only While the figures are stark, the drop-off can be explained u Not reporting income from any other source. by a tightening of the criteria limiting participation to Without obvious incentives to get people into the pilot, ‘very simple’ businesses with sole trader income in 2019/20 it is doubtful that HMRC will hit their targets and have an (that’s us folks) which saw more than five hundred adequate system in place by April 2024. What this means to people removed. Those numbers were thinned out driver sole traders is more discomfort and confusion in the still further by the exclusion of those who had period leading up to digitisation. received Covid support grants. Our involvement in the MTD pilot n Gary Jacobs is a director of since before its formal inception meant “Without obvious Eazitax, an industry specialist at one stage our firm had four clients: incentives to get accountancy practice. He sat on drivers with relatively straightforward the original HMRC Conditionality needs operating within the scheme. But people into the pilot, panel and is currently involved once they received the self-employed it is doubtful with the major trade bodies in income support scheme (SEISS Grant) The Conditionality Campaign. they were no longer eligible. that HMRC will Eazitax.co.uk/conditionality It seems HMRC promised something #conditionalitycuppa they in hindsight had no real idea how hit their targets...”
FEBRUARY 2022
35
