Making Tax Digital
The Government announced its vision to modernise the tax system during the 2015 Spring Budget. In response, HMRC have developed Making Tax Digital (MTD) and we here at phsk have participated in this process by commenting on the 2016 consultations.
MTD will be the biggest change to the way tax is administered in over half a century. It will impact on almost every tax paying individual and every business in the UK by changing the way accounting records will need to be kept and how income and expenses are to be reported to HMRC.
The key requirements of MTD 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 have already begun our preparations for MTD and have set out the following time-line to ensure we assist all our clients to make the transition:
March-2017: We have begun 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 ahead of the first compulsory clients being enrolled in 2018.
April-2017: We will enrol a small number of clients in the Public Beta test of MTD processes.
July-2017: The primary legislation controlling MTD is due to be finalised in the Finance Bill 2017.
Autumn/Winter-2017: We will begin assisting businesses, the self-employed and landlords in migrating software and/or processes to become MTD compliant.
2017/2018: Secondary legislation is due to be released for comment and subsequently finalised.
April-2018: Businesses, the self-employed and landlords with a turnover above the VAT registration threshold (currently £85,000) and an accounting period starting after 5th April 2018 are due to enrol into MTD.
July-2018: The first quarterly updates under MTD will be due to be filed to HMRC.
2018/2019: Legislation controlling MTD for companies is due to be finalised.
January-2019: The deadline for self-assessment tax returns for the tax year ended 5th April 2018 will be the 31st, as normal.
April-2019: Other businesses, the self-employed and landlords are due to enrol into MTD, and VAT returns must also be filed in accordance with MTD.
April-2019: Year-end updates to the quarterly returns are due to commence.
January-2020: The last self-assessment tax return (for the tax year 2018-2019) are due to be filed by the 31st, along with year-end updates for 31st March 2019 year ends.
April-2020: Limited companies are due to enrol into MTD for both Corporation Tax and VAT.