Landlords earning more than £10,000 a year are likely to have to make quarterly tax returns under Chancellor George Osborne’s new digital future for HM Revenue & Customs (HMRC).
The proposal is landlord will have to report their income and expenses every three months and pay income tax on the profits.
Investors will also have 30 days to pay any capital gains tax on any disposals.
The new tax rules are expected to take effect in five years’ time, allowing HMRC to invest £3 billion set aside by Osbourne for building ‘one of the most digitally advanced tax administrations in the world.’
Taking tax online is also likely to include small companies as well, while the Office of Tax Simplification has already launched a consultation proposing to align the taxes companies pay on profits with money earned by salaried workers.
The government seems to want everyone to pay the same taxes on the same level of earnings regardless of their trading status.
This will do away with tax motivated incorporations that allow directors and shareholders to manipulate the tax they pay by not drawing profits from a company.
The OTS is proposing shareholders should pay tax pro rata their share of profits their companies earn regardless of whether they take the money out of the business.
Professional tax and accountancy bodies are protesting that reporting income and expenses every 12 week instead of annually by self-assessment is too much of a burden for landlords and small businesses.
Anita Monteith, tax faculty manager at the Institute of Chartered Accountants in England and Wales, said:
“I cannot see how people can make accurate returns because joint owners or business partners may not have decided how to split profits and expenses.
“Capital allowance claims are made once a year, but can make a real difference to business profits that are taxed, so we need to see how factors like this impact on the system.”
She also argued that millions of taxpayers do not have online access to a digital tax account and HMRC’s own research shows more than 8 million taxpayers need help navigating online filing.