Making Tax Digital: Simplified cash basis for unincorporated property businesses

• AAT supports the cash basis as being optional.  
• There is not strong support for preparing letting property accounts on a property-by-property basis using either the cash basis or UK GAAP as this will add another layer of unnecessary bureaucracy.  
• Changes to the deduction of interest in relation to residential letting are likely to cause confusion for many landlords and lead to potential errors and the understatement of their property business profits.  
• The introduction of the cash basis for unincorporated landlords is likely to result in a marginal saving of time through a removal of the requirement for landlords to calculate accruals and pre-payments. However, as most transactions in respect of a letting activity are via a bank account there will be no reduction in time required to post "cash" transactions.  
• In general, many unrepresented unincorporated landlords already report their letting property income and expenditure on a cash basis largely due to a lack of awareness of existing legislation.  For such payers the move to introduce a cash basis of reporting is welcome.  

General notes on the six Making Tax Digital consultations held in 2016

• AAT wholeheartedly supports the ambition to make our tax system the most digitally advanced tax system in the world. However, AAT is concerned about the timetable for implementation.  
• AAT is concerned about the costs Making Tax Digital (MTD) will place on businesses and taxpayers. A recent survey of AAT Licensed Accountants found that well over three quarters were concerned about software costs and time spent familiarising themselves with the new processes. Almost half are concerned about hardware costs and other as yet unknown costs. 
• It has been difficult to fully respond to each of the six MTD consultation documents given so much technical uncertainty remains. HMRC must delay implementation if significant technical difficulties arise rather than proceeding regardless. Proceeding under such circumstances risks both reputational damage and reduced compliance. 
• AAT favours a phased implementation programme for MTD. The threshold should be set at £83,000 (the current VAT threshold) falling to £11,000 (the personal allowance) over a three year period. This will help the business community whilst simultaneously helping HMRC achieve the best possible outcome.