‘Making Tax Digital’ may simplify HMRC process
Saturday 17 September 2016
Landlords in the buy-to-rent sector could be offered a simplified tax solution which HM Revenue and Customs (HMRC) claims will benefit those with a smaller portfolio of homes.
Around 900,000 second-home owners in Britain could be offered the 'cash basis' tax calculation proposed as part of a 12-week consultation which is now underway and aimed at reducing the complexity of the tax system.
As part of the Making Tax Digital (MTD) proposals, landlords with an annual rental income below the £10,000 mark will not legally need to keep their business records digitally or provide quarterly details to HMRC.
The consultation will last until November with an aim to publish the plan as soon as possible so it can be introduced as part of the 2017 Finance Bill.
Under the proposals, the cash basis tax will only be offered to the smallest property businesses - such as individual landlords or partnerships.
And because the landlords will not need to declare income until it is received, it means they won't need to pay tax until the rent owed has cleared.
With one in five homes now thought to be rental properties, it will mean many landlords could benefit from the sweeping tax changes.
Mike Cherry, national chairman of the National Federation of Self Employed & Small Businesses Limited, said: "Removing small firms and the self-employed with modest turnovers altogether from the proposals will now mean that in addition to the 1.6 million small businesses and landlords that were already excluded, as a result of these changes announced, a further 1.3 million small firms and landlords will no longer be in scope.
"This means that half of the UK’s 5.4 million small businesses will not be affected by quarterly tax reporting."
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