The Making Tax Digital (MTD) initiative, announced in the 2015 Budget Speech, is the most fundamental change to the administration of the UK tax system for at least 20 years. MTD was originally intended to come into full force by April 2018, however, the government has recently announced significant changes to the timeframe and implementation of this initiative.
The essentials: What is MTD?
No more paper records: It will become mandatory to use software to keep accounting records. Paper accounting records will no longer meet the requirements of tax law.
Quarterly reporting: Tax payers will be required to submit updates to HMRC each quarter, directly via accounting software.
The good news for anyone who has been dragging their feet in getting ready for MTD is that the government announced that only businesses with a turnover above the VAT threshold (currently £85,000) will have to keep digital records and only for VAT purposes. These businesses will only need to do so from 2019.
Making Tax Digital will be available on a voluntary basis for the smallest businesses, and for other taxes. This means that businesses and landlords with a turnover below the VAT threshold will be able to choose when to move to the new digital system.
Do note: Those who are not able to engage digitally for religious reasons or due to age, disability or location (due to no availability of broadband) will also be exempt.
What you need to do now depends on the size and structure of your business and how your records are currently kept. You may need to implement or upgrade your accounting software and your processes will most likely need to change.
You will need to organise your quarterly submissions to HMRC or provide your accountant with the relevant information for them to do the reporting on your behalf. In times like this it really does pay to have a qualified accounting firm in your corner.
Our accountants can support you through these changes. Get in touch with us on +44 (0) 20 7759 7553 or accounting@sableinternational.com for more assistance.