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.
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(020) 8367 7319
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