14 Feb Making Tax Digital
For at least 20 years making Tax Digital (MTD) is the most fundamental change to the tax administration system.
Essential elements for businesses
- Paper records will no longer be sufficient
It will become mandatory for almost all businesses and landlords (self-employed, partnerships, limited companies, and others) to use software or a spreadsheet. This helps with the accounting records. Paper accounting records will cease to meet the requirements of tax law.
- Quarterly reporting:
There will be a requirement to submit VAT returns and income tax updates. This helps HMRC (quarterly and annual) directly from the software.
As your accountants, we will support you through these changes. We provide the ongoing services that you need. The changes are fundamental. It’s necessary to review your current record-keeping systems. You further reconsider what work you decide to do yourself. This also helps you decide the activities you wish to include in the service.
When does it start?
VAT: Although your business is registered for VAT your turnover is currently below the VAT threshold. Please note that you won’t be required to keep digital accounting records.
Neither are you required nor to file your VAT returns using MTD compliant software until 2020. Monitor your annual turnover each month as if it increases to above £85,000. We require you to comply with MTD for VAT rules.
The current online VAT return will not meet the MTD requirements but will continue to be available until at least Spring 2020. Pilots of MTD for VAT have started.
Income Tax (self-employed, partnerships, trusts, and landlords who compete for self-assessment tax returns)
MTD is expected to become mandatory for income tax reporting. Not before 2020. Pilots of MTD for income tax have started.
Corporation Tax (limited companies)
The timings for MTD for corporation tax are yet confirmed. They’ll not be mandatory before April 2020.
What are the exemptions?
- There are exemptions for those who are not able to engage digitally for religious reasons. That’s due to factors such as age, disability, or location (eg, no availability of broadband). These exemptions are the same as the current exemptions for VAT online filing.
- VAT registered businesses with a turnover of less than the VAT threshold (i.e., businesses who have registered voluntarily) will be exempt from MTD VAT reporting. This exemption may be removed from 2020 or later.
- When MTD for income tax becomes mandatory there will be an exemption for businesses and landlords. It’s a small turnover. The Exemption level is also not there.
What do I need to do now?
We’ll discuss your transition to MTD. There’s no firm date for when we want you to comply. There are advantages to digitalization. The transition to MTD is much smoother for those. They’re keeping electronic accounting records.
- We need to consider the possibility of a digital exclusion exemption.
- Use accounting software for upgradation.
- Please discuss this with us. Whether you’re considering acquiring software or joining the pilot.
- You’ll acquire software that will allow returns. Maintain records on a spreadsheet. Updates come directly from the spreadsheet. Engage us to do this work.
- Maintain records on paper your processes will need to change. We expect records from you at each quarter-end.
- We further engage with bookkeeping. Whether its quarterly and annual reporting. We use the appropriate software.
Get further information about these changes. Give us a call.