Making Tax Digital income tax pilot extends to property income

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HMRC has expanded its Making Tax Digital income tax pilot to accept quarterly updates from individual landlords with simple tax affairs.

In a release this week the tax authority stated that taxpayers would be able to opt out of the current self assessment regime and use software to report their income tax if at least one of the following applies:

  • They are a sole trader with income from only one business
  • They rent out only UK property but not as furnished holiday lettings

“If you have income from any other sources,” continued the statement, “you may still have to report it using a self assessment tax return.”

Those with income from furnished holiday lets are not included in the current wave.

Agents can also sign up clients to the Making Tax Digital (MTD) for income tax pilot.

To join the pilot taxpayers must be capable of keeping digital records of their business transactions, and commit to sending income tax updates to HMRC at least on a quarterly basis using MTD-compliant software, instead of filing a self assessment return.

The AAT’s Tax Policy Adviser Brian Palmer called it “another step in the right direction,” but pointed out that the list of software developers with income tax MTD-compliant software remains low. At time of publication there are currently just four software providers on the list: Absolute, Forbes, Iris and Rhino, but the Rhino product isn’t open to tax agents and the Iris product is only accessible by tax agents.

Palmer puts the relative shortness of this list down to Financial Secretary to the Treasury Mel Stride’s decision to reverse the order of MTD mandation by rolling out MTD for VAT ahead of income tax.

“Since his announcement,” continued Palmer, “most software companies refocused resources to ensure their delivery of MTD-compliant VAT products well before next April's deadline.”

The ICAEW’s Tax Faculty understands that approximately 20 providers are working with HMRC on the MTD for income tax pilot, with more products to be added to the list as the pilot progresses.

However, some providers may wait until the full suite of APIs has been released by HMRC, and others may wait until MTD for income tax becomes mandatory.

According to the ICAEW, HMRC expects to release APIs (Application Program Interfaces) to allow software companies to develop the functionality to allow all types of income to be reported using MTD for income tax software, but there is no definite timeframe for this at the moment.

About Tom Herbert

Tom is editor at AccountingWEB, responsible for all editorial content on the site. If you have a story that might interest us or wish to comment on the site's coverage get in touch via the site's private message function or Twitter DM (@AWebTom)

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By Jas28
07th Jun 2018 11:32

How is MTD for property income going to work?
For example, take the following scenario, which is based on a real-life situation:
A client (a pensioner) owns some properties jointly with her husband (and he keeps the records), plus one property in her own name (and she keeps the records), plus one property jointly with her brother (and he keeps the records).
In order to do her self assessment tax return, she has to collate the income from 3 different sources, so she has to wait for her husband and her brother to supply her with the necessary information about the jointly owned properties.
It would be a nightmare to have to do this on a quarterly basis, within a 30-day time limit, when it depends on getting information from records held by other people. Also, what would the software requirements be? Presumably she, her husband and her brother would all need to take out separate software subscriptions, and then she would need software capable of combining figures from 3 different sources (and possibly from different software systems). This would be both costly and time-consuming - and for what benefit?

Thanks (8)
to Jas28
08th Jun 2018 12:10

In the original proposal, what I think happens is the record keeper files and names your client. Of course that's going to happen smoothly!

In practice its going to be a cluster kcuf of huge proportions.

Why on earth anyone would volunteer I simple don't know given you still have to file an SA and there seems no way to do the "perido 5" corrects to de-kcuf the clients data

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to Jas28
14th Jun 2018 11:12

at least mtd for property icome has an "opt in" option and can be done instead of the self assessment return. my guess is there will be a very slow voluntary transition

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to Jas28
14th Jun 2018 11:18

there is no awareness or appreciation of the complexity of some ordinary peoples affairs and mtd will make it even more complicated with additional complexities

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07th Jun 2018 16:13

A step in the right direction? How is that then? I think our professional bodies should listen to their members.

Thanks (6)
08th Jun 2018 07:26

They listen hard to some of their members,vinylnobbynobbs.

Unfortunately the ones who work for the Big 4. They are way too busy doing bent audits and fiddling taxes in Panama to have even noticed MTD yet.

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By djtax
08th Jun 2018 12:13

The HMRC list may include IRIS but IRIS does not yet do VAT Returns so cannot be used for MTD for VAT. Also re API and 'bridging software' none is yet available for all those (mostly smaller) businesses who rely on excel spreadsheets to complete their VAT returns (and annual accounts) despite mandation of VAT MTD in less than a year's time. They (we) are all stuck in limbo.....

Thanks (5)
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11th Jun 2018 14:52

J'Accuse!
Some of you might know where that headline comes from.
MTD is a fraud being perpetrated on the taxpayer by unelected "Un-civil servants" most of whom would not know a tax return if it hit them on the face.
And:
Who are not prepared to lose face by admitting what a dog's dinner it is.
I am prepared to back this statement in from of any tribunal. Dear Tom Herbert, I would send you my paper on the subject but I do not know how to get it through to you.

Thanks (1)
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11th Jun 2018 20:17

My recollection is that the early mtd guidance suggested that landlords with more than one let property would have to account for each separately which would be interesting to say the least for most landed estates which might have dozens of let properties and several expenses common to all of them eg insurance legals accountancy office and staffing costs. I do not recall any amendment to this initial guidance and have since retired. Do others know the current position?

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11th Jun 2018 20:17

My recollection is that the early mtd guidance suggested that landlords with more than one let property would have to account for each separately which would be interesting to say the least for most landed estates which might have dozens of let properties and several expenses common to all of them eg insurance legals accountancy office and staffing costs. I do not recall any amendment to this initial guidance and have since retired. Do others know the current position?

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12th Jun 2018 08:11

No-one knows how it's going to work, including HMRC.

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14th Jun 2018 11:08

hello tom , do you know will agents need separate mtd filing software for small businesses having to file their vat returns online? using hmrc software?

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By djtax
to david5541
14th Jun 2018 12:50

If it all does go ahead next April all VAT Returns will have to be submitted using 'appropriate' new software which supposedly will include 'bridging software' for records kept in eg Excel - though as noted above not much is yet known about this let alone anything yet actually available on the market!

HMRC have said they will NOT be making available any free software for the purposes of MTD for VAT. The only exceptions will be small businesses with turnover under the VAT threshold - who can continue to use the existing VAT online filing system - and a very small number of other specific exemptions - eg some religious issues and those living in remote areas without any broadband.

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