Making Tax Digital
Making Tax Digital is part of the government’s plans to make it easier for individuals and businesses to get their tax right and keep on top of their affairs - meaning the end of the manual annual tax return for millions. HMRC believes that Making Tax Digital presents significant benefits for its users.
HMRC Guidance can be found at https://www.gov.uk/government/publications/making-tax-digital/overview-of-making-tax-digital;
HMRC will collect and process information affecting tax as close to real time as possible, to help prevent errors and stop tax due or repayments owed building up.
At the moment most taxpayers cannot see a single picture of their liabilities and entitlements in one place – this is changing. By 2020, customers will be able to see a comprehensive financial picture in their digital account, just like they can with online banking.
HMRC is of the opinion that the introduction of digital record keeping and quarterly updates for the majority of businesses will reduce mistakes and will lay the foundations to go further, with digital nudges and prompts to help businesses steer clear of errors. It will also give businesses a clearer view of their tax position in-year.
HMRC is introducing the changes gradually, starting with Income Tax (2018) before moving on to VAT (2019) and then Corporation Tax (2020) (voluntary associations (i.e. clubs) pay Corporation Tax, not Income Tax, regardless of whether they are incorporated or unincorporated).
HMRC will pilot these changes with businesses starting this April before rolling them out, in an attempt to ensure the software is user friendly and gives businesses time to prepare and adapt. There are likely to be significant changes made as a result of the pilot.
Free software will be available for businesses with straightforward tax affairs.
HMRC has yet to publish detailed explanations of how these changes will affect voluntary associations in practice.
Final decisions will be made before legislation is laid later this year. Nevertheless, the government recognises that for some, digital is genuinely not an option and where this is the case, an alternative will be provided.
The government has already pledged to remove the smallest businesses, self-employed people and landlords from the scope of the changes by exempting all those with annual turnover of less than £10k from digital record keeping and quarterly updates (although they can choose to enroll if they wish). Thus some of our clubs may not have to comply but may do so if they feel it will be of benefit to them.
HMRC has published independent research into Making Tax Digital for business and created a number of case studies to illustrate how Making Tax Digital as a whole will work in practice.
Volunteer Drivers and insurance – a word of warning:
If your club makes use of volunteer drivers, it is important to appreciate that they may not automatically be covered by their motor insurance policy when driving for the club. Whilst some insurers cover volunteer driving within regular motor insurance policies others may charge an extra premium or impose a higher excess for volunteer drivers.
We therefore recommend that you ensure that your volunteer drivers, when using their own vehicles for volunteer driving:
- contact their insurer to ascertain that they are covered by their insurance policy; and
- include their volunteer driving miles when declaring their annual mileage to their insurer
Insurers who do not charge extra for volunteer driving may have signed up to the Association of British Insurers volunteer driving– the motor insurance commitment . Some of these insurers require you to tell them that you are using your vehicle for volunteer driving even though they do not charge an extra premium.
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