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.
Makes you want to weep!
Does this government want anyone running a small business?
We already have to fall in line with all the legislation that governs big businesses, difference being that they have departments to cover each of the many often onerous requirements (Health & Safety, Pensions admin, etc.etc) while we just have to keep swapping hats. Now it seems not only are we unpaid tax collectors, we are going to have to spend more time recording our income than we do making it. Which brings us to IT. So pleased I have another skill to learn, just to keep the cash flowing into HMRC.
Yet another move towards Britain being a corporate bureaucracy. Osbourne seems to want us to be like France without the civil rights. Maybe I should give up trying to be an entrepreneur and stack shelves on PAYE.
The impact of this imposition is being seriously under-stated. In particular while sympathisers have highlighted the fact that anyone with a turnover or gross income of less than £10,000 will be exempt, no real thought has been paid to just how many of the “little people” will find themselves caught up in the dragnet.
Consider this. A turnover or total revenues or gross rentals of £10,000 may deliver an actual income into someone’s pocket of only a few thousand quid. And how many people who are self-employed tradesmen or letting out their homes while they work away are seriously making less than that? A reasonable guess is that almost every plumber, gardener or oddjob man in Britain will trouser at least a few thousand from his work and therefore find himself facing this new tax regime. Indeed unless a source of income is a mere sideline to a main job and really not a significant part of someone’s economic profile it’s hard to see how they won’t automatically exceed this very low threshold.
And let’s be clear. It is going to be extremely burdensone, the more so because it’s going to affect people who are completely unfamiliar with the demands it will create. It will place a legal obligation on your local decorator or the guy next door who lets his home. They will be forced on pain of civil penalty to buy and maintain sophisticated accounting software which will apparently need to let them interface with HMRC every 12 weeks. Just think about that for a moment. Large numbers of people who’ve never run a company and never imagined their low-level economic activities would justify rigorous quasi-corporate reporting obligations throughout the year, requiring much greater IT and accounting skills on their part than they’ve ever needed before, are about to discover that HMRC wants to treat them like they’re Amazon or Starbucks and running an incorporated business (but without the same opportunities for large-scale avoidance and gaming the tax system, of course).
If this goes ahead I predict a major scandal as huge numbers of taxpayers prove unable to comply with these fantastical requirements and the system seizes up because HMRC simply can’t administer the resulting chaos.
This government appears to have a vendetta against small landlords which at a time of housing crisis is ridiculous! We have little legal protection against poor tenants, we are loosing our right to mortgage interest being offset as a business expense – and NOW more legislation relating to quarterly returns. Perhaps we can assume the the government wishes to dispose of independent citizens who are self-employed and neither receive or expect support from their country. Perhaps there is an alternative political party who could and would understand the needs of the private landlord and self-employed person!
It is my understanding this has been postponed to next year now.