Some of you may have noticed HM Revenue & Customs’ publicity over Making Tax Digital or ‘MTD’. If you haven’t, it is HMRC’s vision of replacing the annual tax return with quarterly digital submissions direct from accounting software.
A number of systems changes are/were required at HMRC’s end; for instance the information it collects on interest paid by banks/building societies plus PAYE information on any employed earnings are held on separate systems. On the evidence to date, this does appear to be working. You can sign in or setup your own personal tax account to see this in action: https://www.gov.uk/personal-tax-account. At the same time, HMRC has to gather information on a timely basis on income and expenditure that does not fall within the relatively simple categories above; namely business profits.
The implications for GPs, and GP accountants, are potentially vast, but this doesn’t have to be a negative and significant benefits could be realised. At present, for a typical partner in a GP surgery, the practice hands over its accounting records to the accountant some time after the year end, the accountant works tirelessly on the records and, some further weeks or months later, accounts are produced showing each GP partner’s profit share – the latter is usually complex to arrive at involving, for instance, sessions worked ‘in practice time’ plus additional sessions, seniority pay, property notional rent less interest, appraisals income, etc.
Once the accounts are finalised the GPs’ personal tax return preparation can then begin in earnest using additional records they supply on their personal business expenditure plus any items earned outside the practice.