Landlord accounts keeping & tax return

[sociopath]

Countdown said:

sociopath said:

rfisher said:

Eric Mc said:

In 2024 HMRC will expect landlords to use specialist software for their rental accounts.

Will they provide the software?

If not, how much will it cost?

Will that apply to commercial property?

No

An unnecessary amount

Yes

I'd be surprised if the software wasn't relatively cheap. EY provided us with a VAT MTD solution for £500. This is likely to affect many more people - my guess is that somebody will create bridging software which allows you to upload an Excel spreadsheet directly into HMRC's database. Either that or you'll be able to type the data directly into the HMRC website as you can do with SA100 returns.

But why should we have to pay to have approved software when it's not necessary to keep your accounts?

[Countdown]

sociopath said:

But why should we have to pay to have approved software when it's not necessary to keep your accounts?

It's a cost of doing business.

[Welshbeef]

Countdown said:

Welshbeef said:

FFS what specialist software is needed?

Spreadsheet
Or even “Notes”

Govt wasting our money yet again.

As a "Finance Director" do you use specialist accounting software or do you just use a spreadsheet?

As a buy to let landlord I need nothing more than a spread sheet (or a piece of paper) to calculate it.


What are you asking? Do I used special accounting software to check trial balances or to post a jrnl or to see how transactions are built up?

In nearly all what I do excel is the go to - extracting and manipulating data from the ledgers that too excel is the one, unless there are standard IT created reports that auto refresh.

Imagine Joe bloggs need to buy an ERP to complete trivial buy to let return for the self assessment. Literally ROFLOL.

[Eric Mc]

At the moment, we don't exactly know what standard of software HMRC will insist on for landlords. All of the information they have given since Making Tax Digital (MTD) was first proposed back in the 2015 Spring Budget was that the information had to be provided directly to HMRC in "digital form" .

At that time they insisted that "digital form" did NOT include Excel spreadsheets or "copy and paste" totals from any other form of computerised summaries. The whole thrust of the concept is that information is entered, prepared and summarised by the taxpayer in a specialised, commercially available piece of software which has been approved by HMRC and then submitted, every three months, directly to HMRC from the original software.

All of this was supposed to be in place and ready to go by 6 April 2018.

That was the original plan. As is obvious, that didn't happen. It was clear that UK taxpayers were nowhere near ready for that level of sophistication by 6 April 2018 so the plan was deferred. In the meantime they switched their MTD target to VAT returns which have been compulsorily submitted on an MTD basis since April this year. However, for VAT MTD they did relent on their strict exclusion of Excel spreadsheet data. You still cannot submit data to HMRC directly from an Excel spreadsheet. Instead, you need to transfer the totals from your spreadsheet summaries over to a special piece of "Submission Software" which they refer to as "Bridging Software".

I expect that they will accept this approach for submitting rental income information for landlords but it is not 100% clear at the moment.

[thekingisdead]

Good heads up of what’s coming down the track Eric Mc.

Thank you

[superlightr]

as a letting agent we can prepare the annual income/expenditure summary for landlords with copies of all tax deductible expenses in the correct format and evidence. Good value for £35 when we full manage a tenancy.

We are also set up to do monthly returns for LL if needed when the law changes plus also tax deduction at source if and when that gets introduced by the Govt as per their recent consultation paper.

plus of course taking on and ensuring legal compliance for the letting which many DIY LL just dont have a clue over and above the very simple checks.

[PurpleFox]

Personally, although it will be a PITA, I am looking forward to the three monthly submissions, presumably you will have to pay the tax three monthly as well and not just submit the paperwork?

I am usually in a flap come January trying to find money to pay the tax on income that was earned over 18 months prior. As much as I try to set aside a portion of the income for tax, generally it gets spent so I welcome more regular submissions so as to know where I am at.

[Largechris]

For one rental property I've always done it back of envelope, never been asked to upload any receipts (although I understand the Inland Revenue have access to landlord accounts via letting agencies anyway?).

[Welshbeef]

Aside from mortgage interest, house insurance all other costs that arise I have it run through the agency - the agency then simply pay me a lower rent amount ie a net.

So makes it dead easy

[sociopath]

Countdown said:

sociopath said:

But why should we have to pay to have approved software when it's not necessary to keep your accounts?

It's a cost of doing business.

No it isn't, it's an additional cost imposed by hmrc, otherwise I'd need it now

[Eric Mc]

PurpleFox said:

I am usually in a flap come January trying to find money to pay the tax on income that was earned over 18 months prior. As much as I try to set aside a portion of the income for tax, generally it gets spent so I welcome more regular submissions so as to know where I am at.

HMRC has stated categorically that there will not a be a requirement to pay tax four times a year. In fact, the data they will be getting on a quarterly basis will never be finalised enough to allow a proper tax liability to be calculated - particularly so for sole traders and partnerships.

[sociopath]

Eric Mc said:

PurpleFox said:

I am usually in a flap come January trying to find money to pay the tax on income that was earned over 18 months prior. As much as I try to set aside a portion of the income for tax, generally it gets spent so I welcome more regular submissions so as to know where I am at.

HMRC has stated categorically that there will not a be a requirement to pay tax four times a year. In fact, the data they will be getting on a quarterly basis will never be finalised enough to allow a proper tax liability to be calculated - particularly so for sole traders and partnerships.

They've actually stated the quarterly figures are only an estimate, so you could just say £1 each time without any comeback as long as you pay the correct amount when required

[Eric Mc]

sociopath said:

They've actually stated the quarterly figures are only an estimate, so you could just say £1 each time without any comeback as long as you pay the correct amount when required

The quarterly figures would most definitely be estimated and, in some cases, wildly inaccurate.
Decisions as to what annual claims or elections - such as Capital Allowances or Loss Reliefs - can only be made (no surprises) annually, therefore any calculation of tax part way through a year will be potentially very inaccurate.

We are already seeing such issues with the 60 day Capital Gains Tax on-line filing and payment system where the CGT being calculated is massively out compared to the true CGT liability. And HMRC's "system" for ensuring overpaid tax is woefully inadequate.

Trying to pay tax on profits (whether trading or rental) part way through a year based on quarterly submissions is a recipe for confusion and problems. Far better would be a "pay on account" system where the taxpayer just pays some (possibly round sum) amounts on a regular basis - by direct debit or standing order - and then settles up once the annual liability has been properly calculated. It would not be any less inaccurate and would negate the need for having to make quarterly submissions of what are, in effect, pretty meaningless figures.