Such is the pace of announcements and withdrawals of previously announced news that it is hard to keep up to date with exactly how ‘Making Tax Digital’ (MTD) is going to work.
But one thing is for certain, MTD is going to happen, so here’s what we know so far…
Back in 2015 HM Revenue & Customs (HMRC) issued a paper called ‘Making Tax Digital’. This encompassed the Government’s vision to modernise the UK tax system; replacing annual tax returns with online digital accounts and quarterly reporting requirements for millions of individuals and businesses.
This change, which is proposed to be fully operational by 2020, will dramatically revolutionise the way people manage and pay their taxes. HMRC will make smarter use of the data that is already available to them so that they do more of the work that taxpayers currently have to do themselves, which can only be a good thing!
However just as the plans for MTD were gathering momentum, because of the snap general election, and in order to get the Finance Bill pushed through before Parliament broke for the election, a large number of items were cut from the bill, MTD being one of them. It is however still thought that this will be reintroduced after the election in time for the April 2018 proposed launch date.
Removing MTD from the Finance Bill has however been welcomed as it gives more time afterwards for all of the concerns and queries to be properly addressed. As we edge closer towards digital tax becoming a reality, what do we know so far?
What does this mean for taxpayers and business owners?
- Annual tax returns will be replaced by the requirement to file information quarterly.
- Businesses and landlords who are not exempt will be required to keep up to date digital records and file quarterly updates using compatible software, most likely to be a cloud based accounting solution.
- Annual accounts will need to be finalised within ten months of the end of the accounting period.
- Taxpayers can choose to make tax payments during the year based on the quarterly submissions.
When is this likely to happen?
- Small businesses and landlords with turnover below £10,000 will be exempt from the new regulations.
- Qualifying businesses and landlords with turnover over the VAT threshold will fall under the new regime with effect from the start of the first accounting period that ends after 5 April 2018.
- Qualifying businesses and landlords with turnover under the VAT threshold will fall under the new regime with effect from the start of the first accounting period that ends after 5 April 2019.
- Limited companies and large partnerships will not fall under the new rules until April 2020.
The Government and HMRC still, however, have much work to do behind the scenes, and we will be providing updates on their plans in future e bulletins and newsletters, but for now please do not panic. Although the changes will be a huge shift in the way that most people manage their affairs we will, as always, be by your side to guide you through them.
For more information on digital tax telephone our team on 01228 711888.
Posted: May 16th, 2017