Last week HMRC released consultation documents which had more detail on the move to quarterly reporting. We have highlighted some of the main areas of consideration from the consultation. The consultation discusses sole traders and partnerships and how the move to quarterly reporting will affect them.
Who will have to report quarterly and what will be reported to HMRC?
- Exemptions from quarterly reporting for unincorporated businesses with annual turnover below £10,000. We believe this will be total annual turnover, not turnover per business.
- Four submissions will be made annually to HMRC for those who need to report quarterly. The fourth submission each year will include any necessary adjustments to figures such as capital expenditure/capital allowances and is described as an “end of year activity” submission in the consultation. The three submissions prior to the end of year activity submission will include sales / expense invoices and bank receipts and payments.
- Those who genuinely cannot use digital tools will not be forced to do so under Making Tax Digital and will be exempted from the new obligations. HMRC are considering who will be exempted and will release more detail.
- A consideration to defer the introduction of these new obligations by one year (from 2018 to 2019) for a limited group of businesses and landlords with annual turnover above £10,000 but below a defined upper income threshold. The upper income threshold is to be decided upon.
Changes in late filling penalties and tax payment due dates;
- Late penalties will change and a new regime will be introduced. The consultation proposes a graduated model with each non-deliberate failure to submit information on time attracting penalty points. Only once the points reach a set level would a penalty be charged. A stronger sanction is outlined for those who are deliberately non-compliant.
- Voluntary payments are discussed in the consultation and how HMRC will allocate payments. Quarterly reporting can be used to estimate the tax due for the quarter to pay the tax to HMRC. Seasonal fluctuations with businesses and other adjustments such as stock levels, work in progress, capital expenditure, bad debts and other yearly adjustments will not be included in every quarterly report, they will be included once a year in the end of year activity submissions.
- HMRC will not be providing free software for businesses to use to report quarterly.
- Some software providers will provide free software for very simple submissions but most businesses will have to pick software to use so that they can report quarterly to HMRC.
We have been working with Quickbooks to provide a cost effective solution to clients to enable them to report quarterly to HMRC. Please get in touch if you want to find out more about the Quickbooks online packages.