GET IN TOUCH
GET TO KNOW
61 Friar Gate Derby DE1 1DJ
Registered office: 61 Friar Gate, Derby, Derbyshire, DE1 1DJ T: 01332 202660
Adrian Mooy & Co is the trading name of Adrian Mooy & Co Ltd. Registered in England No. 05770414
Registered to carry out audit work by the Association of Chartered Certified Accountants - auditregister.org.uk 8011438
The Government and HMRC remain committed to the "Making Tax Digital" project. The next big step will be the introduction of quarterly reporting of income and expenditure by businesses and landlords from 2018.
OVERVIEW OF MAIN PROPOSALS
Extending the cash basis - The current cash basis for preparing accounts was introduced as a simplification measure from 6 April 2013. Using the cash basis means that businesses merely need to calculate their profits based on receipts and payments.
There are no adjustments at the end of each period for accrued expenses and amounts prepaid, and no adjustment for stock or bad debts at the end of the period.
Another simplification is that the cost of equipment bought for the business, except for motor cars, can be deducted directly in arriving at the profit without the need for a capital allowances claim. A disadvantage of the current cash basis rules is that interest is limited to £500 a year and a similar restriction is likely to be incorporated into the new rules.
Proposals to simplify basis periods - The current basis period rules are complex and one proposal is for businesses to prepare accounts for a period that aligns with the tax year or even prepare accounts for shorter periods such as each quarter to align with their VAT quarters.
Pay as you go - Another complication of the current self-assessment regime is that where tax has not been collected under PAYE or at source, primarily on self-employed profits and rental income, the taxpayer is required to make payments on account on 31 January and 31 July based on 50% of the outstanding liability for the previous tax year with a balancing payment the following 31 January.
This can make budgeting cash flow for the self-employed and landlords difficult for some to manage. The government is proposing to introduce a new voluntary Pay as You Go (PAYG) system for the self-employed and landlords to make payments towards their income tax, national insurance and VAT liabilities monthly with a reconciliation at the end of the year.