BREAKING NEWS - MAKING TAX DIGITAL DELAYED
The Government announced yesterday that quarterly reporting for income tax and corporation tax will be delayed until “at least” April 2020.
This announcement came as a relief to us and will be welcomed by businesses and landlords, many of whom were previously having to get ready to implement MTD from as early as April 2018.
Originally, HMRC planned to mandate the use of of digital tax records for businesses by April 2018, but concerns were raised that the deadline did not provide enough time for “such a fundamental change”.
However, the one area which has not been postponed is the switch to VAT returns being made via the MTD system from April 2019. This means that all VAT registered businesses with turnover above the VAT threshold, whether companies or unincorporated, are still likely to need MTD compatible software to be up and running by that time.
At Childminding accountancy services we still are able to offer cloud based digital record keeping software to our clients, and have spent some time implementing this as we see its advantages in the long term.
With MTD off the agenda for now, it may still be the right time to reassess your accounting software, and decide whether you have the right package in place. To that extent, the postponement of MTD won't make a huge amount of difference to our work with clients on digital software.
We are looking forward to now concentrating on those clients whom haven't yet migrated onto cloud software at a pace that is suitable for them.
Some of our clients have already seen a real benefit from using our chosen cloud software and we will still encourage our clients to embrace change to be ready for the inevitable!
The new time table for MTD can be read below
What is “Making Tax Digital”?
MTD is the government initiative to modernise HMRC’s tax system, with the aim of making the whole process of administrating tax simpler and more efficient. All of your tax information will be in one place (your digital account) and you will be able to pay tax based on your business activity during the year and you can upload and update your tax account in real time.
Will it affect me?
If you own a business, you are self-employed or a landlord and you pay income tax, national insurance, VAT or corporation tax then it is quite likely you will be affected. This means you will be required to keep track of your tax affairs digitally using MTD compatible software, and to update HMRC at least quarterly via your digital tax account. Eventually this will abolish the annual tax return. This will be the law and there will be penalties for non-compliance.
What do I have to do?
You will need to open and log into your digital account. Everyone will be allocated one through the current Government Gateway. Then you will need to ensure your accounting software can update this account at least quarterly. For most businesses this means a move away from desktop and onto cloud based accounting software. You are required to choose digital (Cloud) software to maintain your business records and to provide updates of information to HMRC. You will be prompted to send summary updates directly to HMRC – quarterly updates will need to be submitted within a month of quarter end, and an end of year activity report will be due within the sooner of ten months of the end of an accounting year, or the 31st of January following the end of a tax year in which the accounting period ended.
As your accountant and tax agent, we can advise you on the software you will need and how to comply with the new quarterly reporting requirements.
When is all this happening?
MTD starts with unincorporated businesses with turnover over £85,000 for accounting periods commencing on or after 6 April 2018. There are various dates after this when other types of businesses have to comply.
We will be contacting all of our clients in 2017 to prepare you and get you ready for Digital Tax well in advance. In the meantime, if you want to discuss how this affects you and your business please contact us.
Payroll Newsletter –
The March 2017 Budget:
How it affects your payroll from April 2017…
The new rates can be found here for your information…https://www.gov.uk/national-minimum-wage-rates
What is Making Tax Digital?
In March 2015 the government announced in the budget their vision to modernise and transform the current tax system and lose the need to file an annual tax return by 2020.
HMRC claims that this will make the administration of tax more efficient as well as be easier for taxpayers to get their tax right and keep on top of their affairs, through the implementation of a fully digitised tax system.
These changes will apply to a wide range of taxpayers, including most businesses the self-employed as well as individual taxpayers and landlords.
So what is changing?
HMRC released consultation papers which outlined what they were planning to do and they asked for feedback from taxpayers and their agents.
HMRC have now released their responses but in brief, they are;
Very small businesses with a turnover no more than £10k will be exempt from MTD but this figure may well change!
Taxpayers will need to send in a summary of their turnover and expenses quarterly with one final year end update.
More taxpayers will be able to use the cash basis of accounting. The threshold for cash basis will increase to £150,000.
When will the changes happen?
Making Tax Digital has a phased roll-out plan which started in early 2016 and is set to end in 2020. Anticipated key milestones are included here in HMRCS Digital Roadmap
What are we doing to get ready for the changes?
Here at Childminder Accountancy, we are working hard behind the scenes to make sure our clients will be MTD ready! We have put various new systems in place to help our clients meet these changes as well as working towards helping those clients that wish to move onto cloud accounting software with our preferred partner QuickBooks online to do so.
Continue to check our website for more updates.