There is currently no model where software providers will be able to provide a free solution for taxpayers to file quarterly when Making Tax Digital is introduced. HMRC will not offer a Making Tax Digital-related filing service.
Businesses will be able to offset their software costs against their income, but many individual taxpayers will not.
However HMRC guidance states that self employed can claim expenses for:
– computer software your business uses for less than 2 years
– computer software if your business makes regular payments to renew the licence (even if you use it for more than 2 years)
Self employed can also claim other software as capital allowances, unless the cash basis is used.
The first tranche of businesses (whose turnover is over the £83,000 VAT threshold) will begin quarterly filings from April 2018, with smaller businesses and individuals a year later. However, the legislative process has been held up following the General Election.
Failing to provide tax relief for individual taxpayers buying Making Tax Digital software is ‘manifestly unjust’, according to RSM senior tax partner George Bull, as tax relief will be made available to businesses.
Further information on Making Tax Digital is available on our website here. Or for more details on digital tax accounts and what they might mean to you, please contact Geoff Cole, Managing Partner, on 01934 620011 or email him at firstname.lastname@example.org.