What is Making Tax Digital (MTD)
• Under MTD HMRC aims to join up its internal systems and so create one account for each taxpayer, for all their different taxes within HMRC, Tax, VAT etc.
• MTD imposes new quarterly filing and potentially payment obligations for businesses and landlords.
Making Tax Digital start dates have been confirmed as:
April 2018 for income tax reporting for unincorporated businesses (sole traders) and landlords
April 2019 for VAT reporting
April 2020 for corporation tax reporting (and, now, income tax reporting for partnerships with turnover exceeding £10 million)
Exemptions are to be announced and these are likely to be included in the Budget (probably in March) and are expected to be included in Finance Bill 2017. It has already been indicated that businesses with annual turnover of less than £10,000 will be exempt although they may be brought into the regime at a later date.
- One of the original changes in MTD was that all information had to be uploaded via accounting software which would have been additional expense for those companies that recorded their accounts in spreadsheets. However, HMRC have relented and softened its original stance, by confirming in the consultation response that “Businesses will be able to continue to use spreadsheets for record keeping.
- But the spreadsheet resurrection has a caveat: “Businesses must ensure that their spreadsheet meets the necessary requirements of Making Tax Digital for Businesses. This is likely to involve combining the spreadsheet with software.”
HMRC have stated that free software will be available, although they will not be supplying it.
It is difficult to imagine commercial accounting software companies developing a tool that will not generate revenue.
MTD is going to happen we therefore should be prepared for it notwithstanding there are still many unknowns regarding precisely how it will work; who will be affected and when.
Our view is that even if spreadsheets are accepted they will need to be in a specific format and have protected (unable to be changed) formulas and summaries.
Over the next few months KFMS will be developing schedules for ALL our clients so that the information we receive will be in a standard format that if it needs amendment to upload to HMRC we will be able to do so. We will also be advising those businesses that we believe should be considering moving to commercial software.
We will be updating this information on a regular basis as and when information becomes available
Please do not hesitate to contact us if you require further clarification.