Changes are to be made with regards to Making Tax Digital for Income Tax Self-Assessment and the way sole traders and partnerships calculate their taxable profits each year.
However, the Chartered Institute of Taxation (CIOT) has voiced concerns, urging the government to delay such proposals, as both will put ‘major pressure on businesses and advisers already reeling from the impact of the Covid-19 pandemic’.
The reform of the basis period rules is due to commence from April 2022 – the CIOT is not only concerned about how little time businesses and their advisors have to prepare for the changes, but also highlights that for some, it leaves them having to find the money to pay tax earlier than they might otherwise have.
Richard Wild, Head of Tax Technical at CIOT, said, “We strongly recommend that any changes to the basis period rules are deferred by at least a year to allow for more thorough consultation, greater understanding of the wider impacts of the change, such as the interaction with MTD for ITSA, and a longer lead in time to allow businesses, agents and HMRC a chance to prepare.”
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Email JaimeHMRC’s Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA) project will see unincorporated businesses having to keep digital records and report their income every quarter from April 2023.
The CIOT argues that for many businesses, a period of stability and rebuilding is needed after the pandemic.
Richard Wild explained, “We recommend that mandation of MTD for ITSA, which is currently due to start in April 2023, is also deferred to allow the basis period rules to ‘bed in’, provide adequate time for software development and testing, and again ensure businesses, agents and HMRC are prepared.
“The government is keen to build trust in the tax system, but rushing in changes to its fundamental building blocks, in order to make possible the introduction of a policy which remains controversial, will not help that aim.”
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