The government is planning a radical policy change to collect tax sooner. What’s the full story?
On 23 March 2021 HMRC launched a consultation entitled “Timely payment – a call for evidence”. Its purpose is to provide HMRC with information that will allow it to advise the government on collecting self-assessment tax sooner. This will have the greatest impact on small businesses, whether they are run by sole traders, partnerships or companies. So when might this change come in and how much sooner will you be expected to pay?
Links to Making Tax Digital.
The consultation revisits the suggestion originally made but abandoned as part of Making Tax Digital (MTD). The idea was to link tax payments with the quarterly MTD reports of business income and outgoings. MTD for income tax is deferred until April 2023 for unincorporated business and landlords with turnover exceeding £10,000 (and later for companies). The consultation suggests that payments could be quarterly, but monthly payments are also being considered.
Will it happen?
It’s appears inevitable that tax will become payable sooner. While this is bad news for businesses, it will bolster the government’s coffers and should reduce the tax increases that will eventually be needed to repay the borrowing because of coronavirus. As for the timing, while not impossible, we think that it’s unlikely to happen as part of the MTD rollout in 2023, but it will come soon after.
Accelerating tax payments sounds like a relatively simple move but it’s actually fraught with difficulties, including, for example, how to allow tax relief in advance for certain deductions which can’t normally be quantified until after a tax year has ended. For this reason the consultation is open to taxpayers as well as tax experts. If you want to get involved you have until 13 July 2021 to provide your input.
What to do next
For further information on this and other topics contact Tony on 07974-418819 or email at email@example.com or through the contact page of the website http://www.milestone-solutions.co.uk