HMRC NEW INITIATIVE – THE END OF THE TAX RETURN!
What is “Making Tax Digital”?
Making Tax Digital (MTD) is a government initiative to modernise HMRC’s tax system, with the aim of making the whole process of administrating tax simpler and more efficient. All of your tax information will be in one place (your digital account) and you will be able to pay tax based on your business activity during the year. You can upload and update your tax account in real time.
Will it affect me?
If you own a business, you are self-employed and you pay income tax, national insurance, VAT or corporation tax then it is quite likely you will be affected. This means you could be required to keep track of your tax affairs digitally using MTD compatible software, and to update HMRC at least quarterly via your digital tax account. Eventually this will abolish the annual tax return. This will be the law and there will be penalties for non- compliance.
What do I have to do?
You will need to ensure your accounting software can produce management information at least quarterly. For most businesses, this means a move away from desktop and onto Cloud based accounting software. You are required to choose digital (Cloud) software to maintain your business records and to provide updates of information to HMRC. You will be prompted to send summary updates directly to HMRC – quarterly updates will need to be submitted within a month of quarter end, and an end of year activity report will be due within nine months of the end of the accounting year. As your accountant and trusted business adviser, we can train you on the software you will need and ensure that you comply with the new quarterly reporting requirements.
When is all this happening?
MTD starts with businesses above the VAT threshold limits (currently £85,000) for accounting periods commencing on or after 6 April 2019. Those affected will be required to keep digital records for VAT purposes. By 2020 it is most likely all other businesses will have to comply.
We will be contacting all of our clients in 2018 to prepare you and get you ready for Digital Tax well in advance. In the meantime, if you want to discuss how this affects you and your business please contact us.
We shall also be running a seminar in April 2018 and would encourage you to attend in order to ensure you have a full understanding of the requirements. More information shall follow on this over the next week.