Draft legislation published in response to Making Tax Digital consultations

9 February 2017

The first pieces of draft legislation and explanatory notes have recently been published in response to the Making Tax Digital (MTD) consultations.

The draft legislation issued is in the areas of ‘Digital recording and record-keeping’, ‘cash basis for property businesses’ and ‘cash basis: treatment of capital’. Whilst the issuing of the draft legislation is welcomed, bearing in mind the start date for MTD is 6 April 2018, it appears that all the calls for a delay in the introduction, have, as yet, gone unheeded.

What does the draft legislation mean?

In the case of the ‘Digital recording and record-keeping’ legislation, it tells us who is caught:

1. any person within the charge to income tax who, otherwise than in a partnership, carries on:

a) a trade, profession or vocation, the profits of which are chargeable to income tax under Part 2 of ITTOIA 2015;

b) a property business, the profits of which are chargeable to income tax under Part 3 of ITTOIA 2005; or

c) any other activity that gives rise to profits chargeable to income tax under Parts 2 or 3 of ITTOIA 2005.

2. Also any partnership, if one or more of the partners is within the charge to income tax.

Certain trades are excluded from this but, generally, if you are self-employed either in your own right or within a partnership, or if you run a property business, these new rules will apply from 6 April 2018.

The worry that most advisers have is not the question of ‘who’ but it is of ‘how’ the recording is to be made. Unfortunately, much of the detail of ‘how’ will be contained within secondary legislation (statutory instruments), all of which have yet to be published and so from a promising start we are left back in the dark, none the wiser as to how best to advise our clients on this matter.

I personally have been in tax long enough to remember the introduction of self-assessment and I do not remember having the same feelings of uncertainty then as I do now; about how this whole system will be initiated, monitored and administered on a day to day basis. Perhaps the hindsight of other HMRC IT systems has made me cynical on this, but it does look like the MTD bus is coming along and we will have to board it… Next stop: who knows?

If you have any questions about Making Tax Digital contact me or your local UHY tax expert. Alternatively, to read more of our tax blogs please click here.