In March 2015, George Osborne outlined the new concept of “making tax easier”. All the tax information relevant to an individual would be gathered into the taxpayer’s digital tax account, and the annual paper tax return would be consigned to history. This was designed to result in a reduction in the administrative burden for taxpayers.
However by the end of 2015 we were advised that Making Tax Digital would involve sending HMRC four updates per year.
Quarterly updates
The requirement to make periodic updates to HMRC is set out in a new schedule A1 to Taxes Management Act 1970 (TMA 1970), which is introduced by FB 2017, cl 121. The financial information required to be transmitted in those updates will be specified in regulations, and Sch A1 para 7(4) says:
“The regulations may not require financial information about the business to be provided more often than once every 3 months.”
Those regulations have not been published yet, but HMRC has made it clear that the maximum period an update can cover is three months. Although a taxpayer may submit more frequently updates if they wish, anything more than quarterly updates will not be required.
As the detail of MTD slowly drips out It now appears that a set of quarterly updates will be required for each trade or business undertaken by the taxpayer. Thus, a self-employed individual who also has some rental income will have to submit a set of quarterly updates for their self-employed trade, and another set of quarterly updates for their lettings business.
End of period statement
The updates are not required to include any accounting adjustments as we understand those adjustments are to be included in an “end of period statement”. This is the fifth submission required to be sent to HMRC.
This end of period statement (EoPS) is the point at which the taxpayer declares they have submitted complete and correct information regarding their trade. The dealine for the submission of this form will be the earlier time of 10 months after the accounting period end or the next 31 January.
Again, a separate EoPS will be required for each trade or business undertaken by the taxpayer.
Final declaration
Finally, after submitting the end of period statement the taxpayer will be required to make a “final declaration”. This is the new name for the annual tax return.
The final declaration is needed to report any income which has not been reported to HMRC through an EoPS, such as savings or employment income, and to make any necessary claims. The deadline for submitting the final declaration is 31 January in the year after the end of the tax year, or if later, the last day of the period of three months beginning with the date of a notice issued by HMRC.
Conclusion
What is becoming is that a self-employed taxpayer will have to interact with HMRC at least six times a year to submit or confirm the following:
- 4 updates (per trade)
- 1 End of Period statement (per trade)
- 1 Final Declaration.
