Consulting with the HMRC – Planning to Help, Helping to Plan

Government – more open about reforms and changes

All too often small business advisors like myself have to find out about the government’s plans for changes to our tax system, on many aspects.
Now however, it appears that they are becoming a little more open about reforms and changes, and it is not only big companies who are being invited to have their voice heard. The consultation papers are available to read and respond to, by anyone with an interest in the area being discussed.

Each of these ‘Consultation Papers’ are not light reading, for instance the ‘Aviation tax Reform’ paper is 29 pages of the government laying out plans to review and reform Air Passenger Duty and to possibly amend the APD treatment of domestic flights and for increasing the number of international distance bands. Other papers range from 8 pages to 66 pages, and all look into each subject such as ‘Modernising the tax system and Clamping down on Tax avoidance’ in some detail and are inviting us to look at the consultations and respond.

Personally I see this as good thing, as an accountant and an advisor my clients look to me to be as up to date with the current and future tax changes as possible, there have been some changes in recent years as we all know, and to make sure that I am in the best position to answer any of their questions to be able to see the consultations as they unfold means that we can plan for both now, and a year or two down the line.

A good example currently is the new Making Tax Digital for Self Assessment which is being rolled out over the next two years.

On the 1st April 2023, the HMRC will make filing quarterly digital Self Assessment returns for any Trade and/or Property income over £10,000 mandatory. This means that if you are a sole practitioner or a partnership with Trade or Partnership Turnover of £10,000 or more, you will have to file digital tax returns on a quarterly basis, and with the possibility of having to pay any tax due on the income quarterly as well.

Making Tax Digital – Reforms of Self Assessment filing processes

The MTD for Self Assessment is already set in Government budgets and the dates are available for anyone to see, what is not yet set in stone, is the plans for MTD for Corporation Tax. Sadly the deadline for feedback on this consultation has passed, closing on 5th March 2021, but you can still read the paper in PDF version to see what the government is planning in detail.

Just as importantly, knowing that this is what the government is planning with the Corporation Tax reforms, may affect any decisions to avoid the MTD for Self Assessment by incorporating your business.

No matter what your position is at present, as part of planning for the future it is always good to know both what the tax situation is now, but also what is expected one or two years in the future.

I would strongly advise anyone looking at reopening or refinancing their business to look at the new potential reforms in any area which may affect them, such as VAT rates for hospitality, and for reverse charges for subcontractors.

If you are aware of what is being discussed in the area you trade or specialise in you can plan for it and hopefully avoid a potential threat or issue with your business, or just as importantly missing out on a potential opportunity. For instance one thing that the government is launching as of 01st April 2021 is Super Allowances’ which will allow incorporated companies to claim 130% deductions for purchases of Qualifying Plant & Machinery Including Computers, instead of the usual Annual Investment Allowance of 100% deduction. Knowing about this in advance has stopped my clients from potentially making purchases too early and not being able to claim the deductions where appropriate.

All proactive and businesses advisors want to be ahead of the information curve, and the best way to do this is to be part of the decision making process when it affects you. Please click on the links below, and go to the HMRC website to see if there are any consultations coming up which you should be part of. If you don’t have time to read a 66 page consultation paper, then we advisors are here to help!

Ella M Doherty FCCA

HMRC Consultation Papers – https://www.gov.uk/government/collections/tax-policies-and-consultations-spring-2021

MTD for Self Assessment – https://www.gov.uk/government/publications/making-tax-digital/overview-of-making-tax-digital

MTD for Corporation tax – https://www.gov.uk/government/consultations/making-tax-digital-for-corporation-tax

Super Deductions for Capital Allowances – https://www.gov.uk/government/publications/new-temporary-tax-reliefs-on-qualifying-capital-asset-investments-from-1-april-2021/new-temporary-tax-reliefs-on-qualifying-capital-asset-investments-from-1-april-2021