29th June 2017
Making Tax Digital
Filed Under: Accounting, Business News, Tax
Major changes are being made to the way in which all taxpayers interact with HM Revenue & Customs (HMRC). This is known as “Making Tax Digital” (MTD) and work has already started with some changes implemented in April 2016, and further changes planned through to completion in 2020. The introduction of MTD will mean that business, self-employed people and landlords will need to keep their records digitally and make quarterly reports to HMRC.
Businesses, self-employed people and landlords will be required to start using the new digital service as follows:
|Landlords and unincorporated businesses with a turnover in excess of the VAT threshold (currently £85,000)||April 2018|
|Landlords and unincorporated businesses with a turnover above £10,000 but below the VAT threshold||April 2019|
|All VAT payments will have to be processed through MTD for the self-employed, unincorporated businesses and landlords.||April 2019|
|All taxpayers that pay corporation tax and partnerships with a turnover of over £10m||April 2020|
Keeping records digitally
Currently, individual taxpayers can, if they wish, submit their annual tax return to HMRC on a paper form, whereas limited companies have had to submit their annual returns electronically for some time. MTD not only means that all income tax, corporation tax and VAT returns are submitted electronically they must also be submitted on a quarterly basis. As all returns must be digital they must provide information in a format specified by HMRC they are insisting that software be used to keep the records required. However, HMRC have firmly said that will not provide free software to the taxpayers concerned.
Getting ready for MTD
Consider using software – If you do not already use bookkeeping software in your business you should consider doing so. There are a variety of packages out there and so it can be a bit of a nightmare to decide which is best for you. We would very much like to work with you in this process so please call your usual THL contact. We would also be able to offer setup support, initial training and ongoing assistance.
Consider changing your year ended – Currently draft rules mean that businesses with a 31 March year end look to enter MTD twelve months later than those with a 5 April year end.
Consider incorporating – Limited companies don’t have to enter MTD until April 2020 so if you’d like more breathing space you could incorporate your business.
Please do not hesitate to get in touch if you’d like to discuss how MTD will affect you.
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