With all the changes we have experienced in the last few years it may sound far fetched but the key commentators on the subject of Making Tax Digital (MTD) tell us that this is the most fundamental change to the administration of the tax system for at least 20 years.
It is really vital that we are aware of the essential elements for businesses and organisations which are:
- Firstly, paper records will no longer be sufficient:
It will become mandatory for almost all businesses and organisations (self-employed, partnerships, limited companies and others) to use software or a spreadsheet to keep accounting records. Paper accounting records will cease to meet the requirements of tax law.
- Secondly, returns and quarterly reporting:
There will be a requirement to submit income tax updates to HMRC each quarter and a final end of year return,directly from software.
WHEN DOES IT START?
For VAT: MTD for VAT starts in April 2019. If you are not currently VAT registered; MTD for VAT will be relevant to you only if you become VAT registered.
For Income Tax (self-employed, partnerships, trusts and landlords who compete self assessment tax returns): MTDis expected to become mandatory for income tax reporting, but not before 2020. Pilots of MTD for income tax have started.
For Corporation Tax (limited companies):The timings for MTD for corporation tax have yet to be confirmed but it will not become mandatory before April 2020.
WHAT ARE THE EXEMPTIONS?
- There are exemptions for those who are not able to engage digitally for religious reasons or due to a factor such as age, disability or location (eg, no availability of broadband).
- When MTD for income tax becomes mandatory there will be an exemption for businesses and landlords with a very small turnover; the level of this exemption has not been set.
WHAT DO I NEED TO DO NOW?
If you are a client of Huddarts it is important to be aware that we need to discuss your transition to MTD.
Although there is no firm date for when you will be required to comply there are advantages to digitalisation and the transition to MTD will be much smoother for those that are keeping electronic accounting records.
Some things to think about:
– We may need to consider the possibility of a digital exclusion exemption.
– If you currently use accounting software it will need to be upgraded. If you are considering acquiring software or joining the pilot, please discuss this with us first.
– If you currently maintain records on a spreadsheet you will need to acquire software which will allow returns and updates to be made directly from the spreadsheets, or engage us to do this work.
– If you currently maintain records on paper your processes will need to change. You will need to provide records to us promptly after each quarter-end and engage us to do the bookkeeping, quarterly and annual reporting or acquire and use appropriate software.
WHERE CAN I GET FURTHER INFORMATION FROM ABOUT THE CHANGES?
Please get in touch with Charles Lucas or Kendal Blackburn. If you send an email by using the contact page on our website please mark it for the attention of Charles and Kendal. They will be delighted to hear from you.
Alternatively you can phone to speak with them. The office number is on our home page.
We will of course be posting further information on our website and like the young chap below (looking very dapper indeed and somewhat keen on finding out as much as he can about MTD) we would love you to keep reading the posts and referring to them.