Making Tax Digital
The Government announced its vision to modernise the tax system during the 2015 Spring Budget and in response, HMRC developed Making Tax Digital (MTD).
The original timetable would have required certain businesses, the self-employed and landlords to enrol into MTD from April-2018 with others enrolling during the following years. However, on 13th July 2017, Ministers set-out the next steps for the Finance Bill which significantly slow the pace of change and provide more time for businesses to adapt.
The key requirements of MTD remain unchanged. It will still be the biggest change to the way tax is administered in over half a century, impacting on almost every tax paying individual and every business in the UK by requiring changes to the way accounting records need to be kept and how income and expenses are to be reported to HMRC. These are:
Digital records must be kept with rules over the level of detail.
Expenses must be analysed, with the minimum headings being those currently used on the self-assessment tax return.
HMRC will require income and expense information at least once every three months via software that complies with MTD.
Once per year the records must be finalised by adding year-end adjustments and capital allowance claims; although this can be completed quarterly. The deadline for this information will vary depending on the accounting period end, but will remain as 31st January following 31st March period ends.
Taxpayers will be able to review details of income from other sources (employment, pensions, bank interest, etc) in their personal tax accounts.
We began our preparations some time ago, and as MTD is still on its way, we are continuing with our original timeline, but are pleased that we have longer to do so on a voluntary basis and that those required to enrol in MTD has been scaled back and that the deadlines to do so have been pushed back.
March-2017: We began trialling MTD compliant software and have selected a small number of clients to enrol into MTD a year early (from 6th April 2017) to help us fully understand the practicalities of MTD and resolve any issues.
April-2017: We will enrol a small number of clients in the Public Beta test of MTD processes.
April-2019: VAT returns, for those with a turnover above the VAT threshold (currently £85,000) must be filed in accordance with MTD.
April-2020: Digital record keeping and quarterly reporting is due to be required from this date.