Tax

Making Tax Digital

Posted on by Jane Maclachlan

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These changes apply to everyone including you: 

HM Revenue & Customs (HMRC) are making revolutionary changes to the tax system which will be launched in 2018. These changes are named Making Tax Digital (MTD). But what does Making Tax Digital mean for businesses and you?  In practical terms Making Tax Digital impacts on your business by requiring the mandatory keeping of digital records in a format acceptable to HMRC and the submission to HMRC of quarterly accounts figures.

What is it? 

  • HMRC is rolling out Digital Tax Accounts and with that, digital record keeping for businesses and landlords. The self-employed, companies and some individuals will need to submit details of income and expenditure on a quarterly basis plus a final year-end update.
  • New businesses will need to make a first return within four months of start-up.
  • MTD is intended to improve the accuracy of business records and minimise errors through the use of new technology.
  • At present, there are no plans to change the tax payment dates although a voluntary ‘pay as you go’ system will be introduced.

Who does it affect?

  • MTD will affect all businesses, including landlords; very few will be exempt. The main exemption will be for landlords and the self-employed with turnover below £10,000.
  • Some businesses may apply for an exemption on the grounds of insufficient internet infrastructure (however, HMRC expects this to be minimal), religion or medical conditions (these will be checked rather than accepted at face value).
  • Charities and community amateur sports clubs will also be exempt, but can voluntarily comply.

What does this mean? 

  • Businesses will have to submit details of their income and expenditure electronically on a quarterly basis, with a month to do this from the end of each quarter.
  • The quarterly updates and the year-end adjustments will be compulsory, and there will be penalties for non-compliance.
  • You will have to start keeping your accounting records and books digitally to allow the transfer of the data to HMRC in the prescribed format.
  • HMRC will not provide software; businesses will need to buy their own MTD compatible software. It is expected that free software will be available to the smallest businesses only.
  • MTD will apply for most unincorporated businesses and landlords for income tax and National Insurance from April 2018. There will be a one year delay for small businesses and landlords where the annual turnover is less than the VAT threshold.
  • MTD will apply from April 2019 for VAT and from April 2020 for corporation tax.

The Solution

  • The revolutionary changes to the tax system mean that the partners and staff of Saint & Co are actively involved in MTD, including attending courses to keep up-to-date with the latest HMRC legislation & guidelines. We are also working with our accounting software suppliers so that we can provide clients with the accounting package necessary to enable you to keep your ‘Digital Accounting Records’ as required by HMRC.
  • As yet HMRC have not issued the final definitive guide to MTD but we do have an outline of the new system. We will over the next year provide further information and discuss with you, the improvements or necessary changes required to your accounting systems and records so that you conform with HMRC requirements.
  • Should you wish to discuss MTD sooner then please do not hesitate to contact the partner looking after your affairs.