The government is aiming to transform the tax system with the better use of information held and has given HM Revenue & Customs (HMRC) an objective of replacing the annual tax return for individuals and businesses.
The information gathering by HMRC will instead be a combination of details from various sources with taxpayers and/or their agents checking and filling in the gaps.
For most businesses HMRC has ambitious plans. It wants them to keep track of their tax affairs digitally and to update their digital tax account from this information at least quarterly. This quarterly reporting, possibly with a 30 day deadline, will be at summary level with a year-end adjustment, in effect the annual tax computation.
This was originally announced in March 2015 but after consultation last year, HMRC have responded on 31 January 2017 to confirm that they will introduce legislation to exempt charities from the Making Tax Digital requirements.
Charity trading subsidiaries will be within the scope of the Making Tax Digital obligations. This is disappointing as most trading subsidiaries are required for the charity’s regulations and for legal and financial practicalities. The profits are normally gifted to the charity so no tax charge arises and the administration is normally undertaken by the charity. This means that the charity will still need to report within the Making Tax Digital obligations. Quarterly reporting for the subsidiary will be voluntary from April 2019 and compulsory from April 2020.
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.