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Making Tax Digital

You may have heard the phrase “Making Tax Digital” or “MTD” bandied around in the media but what does it actually mean?

Making Tax Digital will have a significant effect on the way in which we are all reporting our income to Her Majesty’s Revenue and Customs (HMRC). So what is it? Instead of filing documents, such as tax returns, accounts etc., annually small businesses and landlords will need to keep and file electronic records on a quarterly basis.

In theory this should make everything easier as you will need to keep your records up to date three monthly rather than hunting around for your records once a year. In reality MTD has the potential to create a lot more work for business owners (and their accountants)!

The good news is that the original implementation date has been postponed from April 2018 to April 2019 which gives us over 16 months to get ready. The initial April 2019 deadline relates to VAT reporting by all VAT registered businesses with turnover above the VAT threshold. Businesses registered for VAT but with turnover below the VAT threshold can opt in voluntarily if they want to.

However we should not be complacent. The current plan is for income tax reporting to be mandatory by April 2020 (29 months away). This means that unincorporated businesses and landlords should already be considering how they are going to comply.

Many small businesses believe that MTD will not apply to them. This is not the case. The initial proposals were that MTD would apply to all businesses and in fact was going to be brought in for small businesses first. Currently there are suggestions that there may be some limited exemptions. Less than £10,000 turnover has been suggested as a reasonable exemption in some discussion groups but nothing has yet been agreed.

Not a problem, you think, I will simply log into my HMRC portal and file. Unfortunately HMRC will NOT be providing software to log in to as they do with the current Self Assessment system. Filing under MTD will need to be done through commercial software. The commercial software is not currently available as it is still being developed, although some pilot schemes are now being tested.

Nevertheless, there are steps that we can all take now to ensure that we are prepared for MTD. This is the time to ensure that our record-keeping processes are timely and accurate. We need to make certain that we understand how and when MTD will apply to us. We need to think about how we will submit the information and consider whether to opt in or to wait for MTD to be mandatory.

We have a window of opportunity to get ready for the MTD introduction and we need to make the most of it.

If you wish to discuss any of the above and how it may affect you please do not hesitate to get in touch with me by email, alison.ensor@foremansllp.com, or by phone on 01244 625 500 at Foremans LLP.

Alison Ensor at Foremans LLP 19.10.17

All data and information provided in this article is for informational purposes only. Foremans LLP and the author make no representations as to accuracy, completeness, suitability, or validity of any information in this article and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use.

 

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