Making Tax Digital roll out announced, but is the timing right?
More landlords will have to use the government’s new digital tax system from April 2022 the Government announced today – with most needing to comply by 2023.
The government’s Making Tax Digital programme already requires businesses above the VAT threshold of £85,000 to use the system for VAT returns, meaning they have to submit them through specialist software and keep digital records.
The treasury has now announced that from April 2022, the programme will be extended to all VAT registered businesses with turnover below the VAT threshold of £85,000.
The scope will be further extended to include income tax returns for all taxpayers who file income tax self-assessments for business or property income over £10,000 annually from April 2023.
Since it was introduced in 2019 more than 1.4 million businesses have joined the Making Tax Digital programme, submitting over 6 million returns.
A simpler system?
The government says it will make it easier for businesses and people to pay tax and reduce avoidable errors and fraud.
Making the announcement, financial Secretary to the Treasury, Jesse Norman, said: “We are setting out our next steps on Making Tax Digital today, as we bring the UK’s tax system into the 21st century.
“Making Tax Digital will make it easier for businesses to keep on top of their tax affairs. But it also has huge potential to improve the productivity of our economy, and its resilience in times of crisis.”
John Stewart, deputy director for policy and research at the NRLA said he was surprised at the timing – given the current crisis.
He said: “While we support the principles of Making Tax Digital, we do question the timing of the announcement, coming, as it does in the middle of a pandemic with the likelihood of a recession on the horizon.
“Some landlords will embrace the changes, while others will have concerns about the cost of compliance and the readiness both of themselves and the Government’s systems.”
Capital Gains review
The news around Making Tax Digital comes just days after the Government announced a review of Capital Gains Tax (CGT).
The Chancellor has instructed the Office for Tax Simplification to investigate comparisons with other taxes and whether CGT is distorting behaviour or failing to meet policy objectives. Allowances, exemption, relied and offsets are also all in scope.
Mr Stewart added: “The scope of the review is wide and with residential property already attracting higher rates of CGT we are concerned about the potential outcomes.
“Covid-19 has left the government with a substantial hole in its finances and the last thing we want to see is a tax grab as landlords and tenants are still reeling from the immediate economic impact of the pandemic.”