The ICAEW Blogs & Forums will no longer be updated with new posts. Your community announcements and articles will now be hosted on icaew.com under their respective community areas. This site and its contents will be closed and made available in an archive at the end of October.
Our views on proposals on the cash basis and the reform of basis periods for unincorporated businesses and landlords
ICAEW has responded to the six Making Tax Digital consultation papers published on 15 August 2016.
Two of the consultations were aimed at simplification of the tax system. Below is a summary of our key messages on these proposals and links to our responses.
Our response to the main MTD consultation, Making Tax Digital: Bringing business tax into the digital age, is covered in ICAEW REP 171/16 – see the separate news item ICAEW response to Making Tax Digital: Bringing business tax into the digital age
Simplifying tax for unincorporated businesses
In ICAEW REP 172/16, our response to simplifying tax for unincorporated businesses, we recommend that the government refrains from making any non-essential changes to the system while MTD is being implemented. While we support tax simplification we suggest that tax rules in scope for change must be separated from digitalisation so that people have time to understand the changes without overloading the pace.
The consultation paper proposed changes to four areas of the tax system for unincorporated businesses. We expressed the following views in our response:
Cash basis for unincorporated property businesses
We responded to proposals to introduce the simplified cash basis to unincorporated property businesses in ICAEW REP 173/16.
The full cash basis does not lend itself well to property businesses as it will result in landlords paying their tax liabilities at the whim of their tenants and will not give the predicted certainty. Although the tax payable for the year would be based on rents received, it is the effect on the payments on account that causes concern.
The overriding theme in our responses is that while we support simplification measures, too much change at the same time is not welcomed.
We made the following points:
I have a number of non-UK resident landlords whose only UK income is rental income but who are entitled to the personal allowance. In many cases they are over the £10k income threshold but do not pay tax because their net income after expenses is less than the personal tax allowance. Quarterly reporting would therefore be an additional burden with no advantage to them or HMRC.