HMRC Delays Making Tax Digital Again
Having missed the target to get new legislation passed by over a year, HMRC have had little choice but to delay 'Making Tax Digital' for landlords until 2024. Our message to landlords remains unchanged - do nothing until it is clear what is required and even then, do not change the way you do things just to comply with HMRC.
Our advice on MTD
Announced several years ago, as part of the Treasury's initiatives to move small businesses into the digital age - there is merit in moving to an automated system where accounts are updated quarterly, taxes paid accordingly and corrections made as part of an annual reconciliation.
However, this will not raise more taxes as hoped by the exchequer and whilst those landlords who still insist on doing everything on paper will finally be forced to update their practices, for the rest of us it ought not need to be a major change.
Many organisations see this as an opportunity to sell specialist software to landlords, but unless you are unhappy with the way you currently run your business, our advice would be to avoid switching to having to do things completely differently in order to fit with the process imposed by a software package.
For some, the scale of their operation dictates the need for specialist software but for the vast majority of landlords with just a few properties or tenants, a spreadsheet has and will continue to be a perfectly adequate way of keeping track of ones accounts. Obviously automatically reconciling ones bank account is a real benefit if you have several hundred payments or receipts to reconcile - but for most, it will be an unnecessary overhead.
Many will need to keep more on top of their accounts, which is no bad thing, as returns will need to be submitted quarterly - but for those who already submit returns online this should not be a significant change as long as you keep your accounts up to date and in a form that suits the HMRC submission requirement (hence our advice to change nothing until HMRC define their submission requirements).
A solution that we will investigate further and promote to those of our members who it may suit, is known as 'bridging software'. Instead of throwing away your spreadsheet and starting to use a package which dictates what and how you keep track of your accounts, bridging software sits between your spreadsheet and HMRC, extracts the information needed by HMRC, puts it in the correct form and then submits it. As previously stated, for many, this will be the simplest and cheapest solution requiring least change to normal operation.
To keep up to date on the latest information in this area and explanations of options in this area, go to www.landlordmtd.com (a site setup by the PDPLA back in 2019) and subscribe to updates.