Making Tax Digital – update!
Last week HMRC published the response to the ‘Making Tax Digital’ consultations. The consultations asked for feedback on the government’s plan for ‘a transformed tax system and the end of the tax return’ by 2020. The consultation looked at how digital record keeping and quarterly updates would work in practice. Here is an update on what we know:
Dates and Exemptions
The dates for the introduction of MTD remain the same:
- April 2018 for Income Tax
- April 2019 for VAT
- April 2020 for Corporation Tax
All self-employed businesses and landlords with a turnover of under £10,000 a year will not have to adhere to MTD unless they choose to do so.
Individuals who are employed and pensioners will also be exempt unless they have a secondary income of over £10,000 a year from self-employment or property.
A final decision has not yet been made on whether there will be a delayed one year start for small businesses and landlords with income in excess of £10,000 a year.
Businesses who genuinely cannot get online because of their individual circumstances, such as disability or geographical location, will be exempted from MTD.
Software and Reporting
Businesses will need to send summary data on a quarterly basis through digital means. Businesses who currently use ‘three line accounts’ (where they report only income, expenses and profit) to HMRC will be able to continue submitting data in this way on a quarterly basis under MTD.
Businesses will be able to continue to use spreadsheets to record receipts and expenditure, but the spreadsheets must meet the following requirements:
- they must include digital record-keeping functionality
- they must provide quarterly information updates
- they must support end-of-year activity.
HMRC say that the spreadsheets will need to be able to link with software in some way in order to meet these requirements. The question of how this could work will be explored during the initial pilot scheme, which begins in April this year.
The summary response to the consultations can be found here.
We are monitoring the progress of the Making Tax Digital plans and will keep you up to date on further announcements.
If you would like any further information please email me on email@example.com
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