MAKING TAX DIGITAL – WHAT YOU NEED TO KNOW
What is Making Tax Digital?
Making tax digital is a new government initiative that by 2020 sets out the end of the tax return system as you know it. Are you read for the upheaval?
From 2020, HMRC will begin to phase in a system requiring businesses to change from submitting one tax return per year to submitting four separate returns throughout the year.
Key problems with Making Tax Digital:
Increased administrative burdens on businesses who already pay an average of £3,600 a year on tax and regulatory compliance.
Mandatory quarterly reporting increases time needed to keep your records up to date for each quarterly report taking you away from your key business functions
Increased expenditure at a time when many businesses are under increasing pressure to lower costs.
More information is available at http://www.gov.uk/personal-tax-account.
Who does it apply to?
The Making Tax Digital initiative will apply to a wide range of taxpayers, including most businesses, self-employed people and landlords, as well as individual taxpayers. HMRC have confirmed that there will be a minimum threshold of £10,000 annual sales at which Making Tax Digital will become compulsory and exemptions will apply “for taxpayers who cannot engage digitally” and that the legislation will be “based upon the existing VAT online filing exemptions.”
All literature published so far suggests any exemptions will be difficult to qualify for, so all clients should be prepared to file additional information alongside their VAT returns.
Key dates for Making Tax Digital
July 2017 – Dec 2017 Digital tax accounts show taxpayers an overview of their tax liabilities in one place.
July 2018 – Dec 2018 Businesses, self-employed people and landlords with turnover above the VAT threshold start updating HMRC quarterly for Income Tax and National Insurance obligations.
2019 Businesses with a turnover between the minimum threshold and the VAT threshold start updating HMRC quarterly for Income Tax and National Insurance obligations. MTD starts for VAT figures and returns. 2020 Most businesses, self-employed people and landlords start updating HMRC quarterly for Corporation Tax obligations.
More information is available at https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/484668/making-tax-digital.pdf