Expats landlords renting out homes in the UK have won a reprieve under the tax man’s making tax digital initiative.
HM Revenue & Customs has announced the flag ship program gives landlords a 12-month respite from signing up while testing takes place.
Meanwhile, landlords collecting rents of less than the VAT threshold – currently £85,000 a year – will not have to switch to the new system until later.
Mel Stride, Financial Secretary to the Treasury and Paymaster General, explained landlords with a turnover below £85,000 will not need to keep digital records of income and expenses until April 2019.
Pilot due to start
Proposed quarterly updating of online records for tax purposes is delayed until at least 2020.
He added most landlords can choose when to make the switch to digital record keeping.
“Businesses agree that digitising the tax system is the right direction of travel. However, many have been worried about the scope and pace of reforms,” said Stride.
“We have listened very carefully to their concerns and are making changes so that we can bring the tax system into the digital age in a way that is right for all businesses.”
HMRC says development of the making tax digital system is well under way, with a small pilot due to start later this year, with wider testing beginning in spring 2018 for VAT-registered businesses.
40% still keep paper records
“As VAT already requires quarterly returns, no business will need to provide information to HMRC more regularly during this initial phase than they do now. All businesses and landlords will have at least two years to adapt to the changes before being asked to keep digital records for other taxes,” he said.
Under the making tax digital program, landlords will have a digital account for updating income and expenses each quarter.
Many will have to make a leap from paper to electronic recording with recent research revealing almost 40% still do not keep digital accounts.
Although the system calculates tax due throughout the year, payments will still be collected each January unless a landlord elects to hand over cash early.