- Posted Wednesday May 17, 2017
The Government's flagship Making Tax Digital initiative was first announced back in 2015, and as with all major undertakings of this sort, it has been far from the smooth ride towards implementation that the Treasury and HMRC would have been hoping for.
The taxman's plan was originally to have everything operational by 2020, with planned new rules requiring quarterly reporting of income and expenditure being gradually phased in between now and then according to the size of the business entity in question.
The latest bump in the road has been the snap general election called by the Prime Minister, which has meant that many of the related measures covered by Chancellor Philip Hammond in his spring Budget, including this quarterly reporting requirement and the need for tax records to be kept digitally, have had to be put to one side to allow a slimmed-down version of the Finance Bill to be passed before Parliament went into recess.
The idea behind Making Tax Digital is to allow the taxation process to be conducted in real time by making better use of information through a single financial account, much in the same way as many of us now do with online banking, and in all likelihood, the currently-delayed matters will come back onto the new government's To-Do List pretty quickly after the election.
This will clearly have implications for both businesses and tax payers in all sectors and of all types, but there are particular issues for both primary care practices and the GPs that work in and for them that all should be taking into consideration.
For GP practices, the various areas from which they derive their income and the schedule on which these payments arrive in the practice bank account will require specific attention.
Monies relating to patient list-based income should be fairly straightforward, but the arrival time of income from the provision of local and national enhanced services may well be somewhat less predictable, which will impact on the reporting that the new system requires you to do.
There's also the question of when your individual practice's financial year end is, as this will obviously be different for different businesses and will still be required to complete the usual year-end tax return as well as the new quarterly ones.
From the point of view of self-employed locum doctors, or indeed anyone with money coming in from, for example, rental properties, all your different income streams will need to be accounted for on a quarterly basis, which is going to significantly increase the administrative burden that you will face in keeping your financial affairs in order.
Another matter that has been delayed is the planned reduction in the tax free company dividend allowance from £5,000 to £2,000, which may have an impact on practitioners who draw such income from any limited companies that they have formed.
While everything is obviously a little up in the air at this moment, the best way forward is going to be to prepare as thoroughly as possible as far in advance as you can, and to ensure that you have all the systems in place to deal with the enhanced reporting requirements that are coming everyone's way.
The requisite software systems are still some way from being completely finalised, but beginning to talk to your professional advisors now about the sorts of solutions that are right for your individual requirements, and working to keep things as simple as possible are essential actions.
From an individual point of view, these changes may end up being a blessing in disguise, as they could give you the imperative you might need to become more organised in the way that you manage your personal financial affairs.
However the Making Tax Digital concept eventually turns out in practice, it will change the way in which practice finance are managed, and it's very definitely best to try to get ahead of the game if you can.
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Specialist medical accountants at RMT offer medical professionals advice and guidance that is tailored to the unique monetary and legislative environment in which healthcare industry workers live. For more information please visit www.r-m-t.co.uk.