(MTD) Making Tax Digital – What Does It Mean?Written on February 1, 2017 by Kirk Rice LLP
The Question:
I have heard the phrase ‘Making Tax Digital’ a number of times, but I’m not entirely sure whether it will affect me and my small business. What can you tell me about it?
Kirk Rice LLP answers:
Making Tax Digital (MTD) is the name for the Government’s plan to introduce a fully digital tax system. HMRC currently plans to phase in the new digital system starting in 2018 and completed by 2020. This will mean:
- There will be no more form-filling. Taxpayers will no longer need to tell HMRC information it already knows e.g. salary details under PAYE
- It is intended that the tax system will operate in ‘real time’ keeping everyone up to date with a taxpayer’s tax position
- Taxpayers will have access to digital accounts with the information HMRC needs automatically uploaded, bringing an end to the tax return.
The major change for businesses and landlords is that MTD imposes a new quarterly filing regime of accounting information. HMRC have indicated that this information will need to be filed with HMRC using accounting software. Initially HMRC said that spreadsheets would not be permissible, but have since said that spreadsheets can still be used to as long as the data can be exported into an appropriate software package in order to make the quarterly MTD filings. This means that for businesses or landlords that currently maintain their accounting records manually or on spreadsheets that they will need to implement an appropriate accounting package.
MTD is being phased in between April 2018 and April 2020 as follows:
- April 2018 – sole traders, partnerships, LLPs and landlords with combined turnover above £85,000 (NB partnerships and LLPs with a turnover above £10m are deferred until 2020)
- April 2019 – unincorporated businesses and landlords with combined business turnovers of below £85,000
- April 2019 – VAT obligations will need to be filed via accounting software
- April 2020 – Companies will start updating HMRC quarterly for their Corporation Tax obligations through their accounting software
- April 2020 – partnerships and LLPs with turnovers above £10m
Any business or landlord with annual gross income below £10,000 would be exempt from the new obligations.
We will be providing lots of information about MTD to keep you up to date in the coming weeks and months as well as holding some seminars. If you would be interested in being included in these communications and other Taxing Times questions, simply email info@kirkrice.co.uk stating Taxing Times in the subject heading and we will add you to our distribution list.
For further information now, click here to read the Government Overview on ‘Making Tax Digital’
Any reader interested in discussing this topic further can telephone Graham Jennings at the Ascot Office on 01344 875000, or James Moody at the Putney Office on 020 8789 8588 or email info@kirkrice.co.uk
Please note: answers are given for general guidance only and specific advice should be taken before acting on any of the suggestions made.
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