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MTD 4/7: Simplified cash basis for unincorporated property businesses

November 7, 2016

This consultation is simply about allowing buy to let landlords (all right, all right, and other “unincorporated property businesses”) to use the cash basis.  Chapter 2 of the condoc is for landlords, chapter 3 for rep bodies.  There’s also an anonymous survey which is interesting, long, and in my view quite bizarre (have a look:  it’s a google doc.  I seriously question whether HMRC should already know the answers to these questions, and if they don’t, whether a google docs survey embedded in a consultation document which, frankly, is never going to be read by people who aren’t already tax policy wonks is the way to find the answers.  Try research!  If you really need to know, try paying someone to do the work and find out.)

Of course, if you put small landlords onto the cash basis, you immediately come up with the problem of what to do about tenants’ deposits…

Interestingly they don’t mention that in the “civilians” chapter but in the “professionals” one.  To be honest, by the time you’ve dealt with special rules for deposits, you might as well have done GAAP in the first place, surely?  And if you’re a buy to let landlord and you don’t use an accountant, well, perhaps you should start thinking about getting one…?

 

Again, I’ve put the questions under a cut in case you want to see them, but I haven’t answered them individually.  But if you want to reply (and hurry up: the deadline is quarter to midnight on Monday 7th November!) the email address is propertycashbasis.consultation@hmrc.gsi.gov.uk  – you don’t have to answer every question, you can just email with your comments and concerns.

Question 1: Do you feel there should be a relevant maximum limit imposed
for eligibility for the cash basis for unincorporated property businesses? If
so, what should this limit be and why?

Question 2: Do you feel there is any reason why the cash basis should not
be optional for all eligible unincorporated property businesses?
Question 3: Would you want to opt in for each of their property businesses
separately (for example, UK property business and overseas property
business) or would they prefer to choose whether to opt in for all their
property business income or none of it?

Question 4: Does the above advice give you enough information to decide
whether or not to use the cash basis with/without (please indicate)
professional advice? If not, what else would you need to know about the new
rules?

Question 5: Does a regime that allows for individuals letting jointly, not in
partnership, to separately opt to report using the cash basis present
particular difficulties or issues?

Question 6: Should eligibility for the trading income cash basis affect
eligibility for the cash basis for unincorporated property businesses? If so,
do you have any suggestions on what this interdependence should be?

Question 7: Would only recognising deposits that landlords are entitled to
keep at the end of a tenancy create unnecessary complexity?

Question 8: Do you feel there is anything which has not been considered
which could make the cash basis as simple as possible for landlords?
Question 9: Are you aware of any risks that the cash basis for
unincorporated property business could present which could lead to the
avoidance or reduction of liability to income tax? If so, please provide
details.
Question 10: Do you have any comments, not already provided, on any
aspect of the proposal?

Question 11: If the government introduces a simpler tax system for
unincorporated property businesses, please provide details of how this will
affect your business. This should include details of both the expected oneoff and ongoing benefits and costs of:
a) Familiarisation with the new basis and updating your software or systems
b) Not having to keep accruals accounts and prepare calculations in
accordance with UK GAAP.
Question 12: Please tell us if you think there are any other benefits or costs
not covered in the summary of impacts below.

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