Making Tax Digital: What will it mean for you?

Following the decision to call a general election the Government have dropped HMRC’s MTD plans from the Finance Bill 2017. A new Finance Bill is expected to be introduced later this year and, if plans are not delayed, the impact of Making Tax Digital cannot be underestimated, find out how it will affect you.
Following the decision to call a general election and the need to rush through the Finance Bill 2017, the Government have dropped HMRC’s MTD plans from the Finance Bill.

A new Finance Bill is expected to be introduced later this year following the general election. HMRC have started piloting MTD with some individuals and businesses and if the current party are re-elected we expect the MTD plans to be reintroduced in the new Finance Bill. If this happens, we are hopeful that HMRC will take on board the feedback from the profession, MP’s and House of Lords and delay the implementation of MTD.

The potential impact of MTD cannot be underestimated and we have outlined in brief below the proposals as they were before they were dropped, which would affect individuals, partnerships and trustees with rental and other businesses.

Key dates
If HMRC stick with their original proposed timetable, the timescales for the imposition of MTD are as follows:

April 2018 – If your turnover is in excess of the VAT threshold (currently £85,000)

April 2019 – If your turnover is between £10,000 and the VAT threshold

April 2019 – Any other VAT registered businesses

April 2020 – If you pay Corporation Tax

There will be exemptions for charities, Community Amateur Sports Clubs and for those taxpayers who are “digitally excluded”. Digitally excluded will generally include those who cannot access or use digital accounting for reasons of religion, disability, age or remoteness of location.

Five submissions a year
Businesses, self-employed people, trustees and landlords will be required to keep digital records (more below) and file quarterly summaries with a final end of period statement. The end of period statement will effectively replace the current Self-Assessment Tax Return reporting the annual figures to HMRC.

Quarterly submissions will be due a month from the end of each quarter. The end of period statement will be due either 10 months following the end of the period, or 31 January, whichever falls earlier.

Self-Assessment payment dates will not change, but HMRC are introducing a voluntary pay as you go scheme which could indicate additional changes in the future.

Where business is carried out through a partnership, individual partners will not have a requirement to make quarterly submissions in respect of their partnership interest. A nominated partner will make a submission on behalf of the partnership, which will then flow through to individual partner's tax accounts.

HMRC will not have any powers to enquire into the figures reported in the quarterly updates and therefore cannot charge accuracy or tax related penalties in respect of them, but we suspect that this will not be the case for long.

Digital record keeping
Businesses, self-employed people, trustees and landlords impacted by MTD will be required to use digital tools to keep all their records from the date that MTD applies to them. Failure to keep digital records could result in a penalty of up to £3,000.

Originally, HMRC stipulated that keying data into a spreadsheet would not be sufficient digital record keeping. HMRC have now softened their position but, it is likely that the spreadsheet will have to integrate with accounting software or apps to comply with MTD’s technical requirements. There is no stipulation that taxpayers need to keep digital records themselves, therefore we are currently exploring digital solutions for our clients so we can keep the records on their behalf.
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