Making Tax Digital

Making tax digital (MTD) is a complete change to the way businesses currently report their
affairs to HMRC.

This new system which will basically commence in April 2019 requires quarterly reporting of
income & expenses & then a further annual declaration making a minimum five submissions
to HMRC each year as opposed to the current one submission!

On Thursday 13th July 2017, we received the news that the plans for Making Tax Digital were changing. Since this announcement we have been in regular dialogue with HMRC and our clients to understand the impact of these changes.

To re-cap what has changed:-

  • Businesses with greater than £85k turnover will need to keep digital records from 2019 for VAT purposes.

  • Businesses with greater than £85k turnover will only be expected to report data quarterly for the purposes of VAT from April 2019. For other taxes this will be 2020 or later.

  • Businesses/landlords with less than £85k turnover can keep digital records and report quarterly to HMRC on a voluntary basis.

  • Businesses which are VAT-registered but are below the VAT threshold will not be mandated to do quarterly updates or keep digital records, although they can voluntarily do so.

What you have to do!
Firstly, you will need to tackle quarterly reporting. This is achieved by using software to provide quarterly updates of financial information to HMRC. These updates will be a summary of income & expenditure only & the level of detail will be similar to the analysis shown on the self assessment tax return.
It will be possible to alter your update periods to align the income tax update cycle with your VAT cycle.

Annual reconciliation
An end of year statement must be completed to include additional information not included in the quarterly reports & to make adjustments required to calculate the taxable profit.

When do you do it?

  • Quarterly reports are submitted 1 month from the end of the period.

  • End of year statement will under normal circumstances be submitted 10 months after the end of the accounting year. If it is a new business or there has been a change in accounting reference period, you will need to file on 31 January following the relevant period if this is earlier.

Therefore, if your accounting year end is 31 March, the year end statement must be filed by 31 January which is the same as under self assessment. However, if your accounting year end is 30 April, the year end statement must be filed by 28 February. An acceleration of information by 11 months when compared to the self assessment system.

Is anyone exempt?

  • Businesses &landlords with turnover below £10k.

  • Charities & Community Amateur Sports Clubs.

  • People who cannot engage digitally be that on religious grounds or due to age.

What do you need to do now?

You need to start using accounting software.
Obviously, Galley & Tindle will advise you on the requirements & assist you with compliance. It should be noted that MTD is evolving so will be updating you as matters progress, so watch this space!

How can we help?

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