Making Tax Digital - What is it and what should I be doing?
Making Tax Digital (MTD) is the biggest change to tax reporting requirements since the introduction of self assessment and it will take effect from April 2018. Despite this it has received relatively low publicity to date.
In this year’s Spring Budget the Chancellor referred to a delay until April 2019 for smaller businesses and landlords but with the Class 4 NIC announcement (and subsequent u-turn) this got little attention.
In essence MTD is the drive towards all tax reporting being online and in as near to real time as possible, with the biggest impact being on landlords and businesses with combined gross rent and turnover of more than £10,000 per year.
The new requirements are in three parts:
- Those above the £10,000 threshold are going to be required to keep their records digitally either by using some form of accounting/bookkeeping software or by using spreadsheets. The records can be kept either by the tax payer personally or by their agent, but they must be kept digitally.
- To confirm that records are being maintained in a digital format there will also be the requirement to submit a quarterly summary of these records to HM Revenue & Customs within one month of the end of the quarter. By using accounting software this should be a fairly simple exercise as no accounting or tax adjustments are strictly required on these submissions (although can be done if preferred).
- Finally there will be an end of year adjustment submission within which the accounting and tax adjustments will be made. The deadline for this is ten months following the end of the accounting period.
The introduction of these rules is being phased in depending on the level of rents/turnover:
- 5 April 2018 – if turnover is in excess of the VAT threshold
- 5 April 2019 – if turnover is below the VAT threshold (the VAT return also becomes part of the quarterly submission from this date)
- April 2020 – for companies and partnerships with a turnover above £10 million.
So what should you be doing to prepare for these changes?
- Check if/when MTD will apply to you
- Review your current record keeping practices and discuss MTD with your software provider or with a cloud accounting software specialist
- Speak to your accountant/tax adviser about the changes and your records.
As part of our support for those who will be affected by the introduction of MTD we will be running seminars and producing a specialist guide. To register your interest in these and to receive further information please email MTD@streetsweb.co.uk
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