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4 | What’s ahead for businesses in 2020?
WHAT’S AHEAD FOR
BUSINESSES IN 2020?
Making Tax Digital: What
happens next?
Against a background of numerous government
U-turns, Making Tax Digital (MTD) for VAT-registered
businesses took effect as planned in April 2019.
It’s been a rare success story for HMRC too, with 94%
of the UK’s 2.2 million VAT-registered firms complying
with the first two quarterly deadlines.
A light-touch approach towards issuing penalties for
non-compliance remains in place until April 2020,
with the Revenue preferring to nudge those reluctant
business owners to join the digital revolution instead.
Given its success, MTD for other businesses seems
likely to be the next extension of the Government’s
digital regime – just when is anyone’s guess.
Ministers pulled the plug on fully rolling out MTD for
individuals in May 2018, although it remains in the
pipeline. When it does arrive, it’s likely to include a
simpler assessment and real-time tax code changes.
It should also spell the end for taxpayers having to
file self-assessment as we know it, possibly from
2022/23 but probably no earlier.
Before then, as part of the MTD scheme, the Revenue
could merge personal tax accounts with business
tax accounts.
In October 2019, the Office for Tax Simplification
(OTS) called on HMRC to implement an individual tax
account to enable all taxpayers to see information
about different types of income in one place.
If HMRC agrees, it could soon be the case that
individuals see self-employment and rental income
in new tiles alongside other tiles for employment
income, savings income and national insurance.
HMRC to maintain compliance
crackdown on several fronts
Tax inspectors have had their knives sharpened for
a while, especially for the largest businesses, after
HMRC admitted it is actively probing around half of
the UK’s largest firms at any one time.
Since 2010, the Revenue has secured £185 billion in
extra tax through investigation and prosecution.
It is successful in more than 90% of criminal cases
it brings to trial, and in 2018 secured more than 830
criminal convictions for tax and duty fraud – more
than 80% of those charged.
Whether or not that crackdown applies to the private
sector through the extension of the off-payroll rules
remains to be seen, especially with industry bodies
continuing to demand a 12-month delay after the
cancellation of Budget 2019.
Depending on the outcome of the election, that could
go either way. It leaves private-sector organisations
that engage contractors with very little time to
prepare for the changes that will be coming in.
That’s the view of the Association of Taxation
Technicians, which believes bringing in these rules
from April 2020 “would lead to more errors and risks
repeating errors in the public sector [in 2017]”.
As it stands, medium and large-sized organisations
that use private-sector contractors will determine
whether an engagement falls within the rules from
April 2020. Smaller firms will be unaffected.
Then there is reverse charge VAT for construction
services, which has been postponed once already
and is due to kick in next autumn, changing the
way some construction industry contractors must
account for VAT.