Making Tax Digital has been described as the most significant change to the UK tax regime since the introduction of PAYE more than 70 years ago.
In the Spring Budget the Chancellor Philip Hammond finally confirmed that Making Tax Digital (MTD) will start to be implemented from April 2018.
The latest policy paper published by HMRC in March 2017 sets out the following timetable for the phased introduction of MTD:
- April 2018 – Businesses and landlords with profits chargeable to Income Tax and that pay Class 4 National Insurance contributions (NICs), with turnovers and rents in excess of the VAT threshold (£85,000)
- April 2019 – Businesses and landlords with profits chargeable to Income Tax and that pay Class 4 NICs, with turnovers and rents below the VAT threshold (£85,000)
- April 2019 – The VAT element of tax compliance for VAT registered businesses (including companies)
- from April 2020 – Businesses that pay company taxation, excluding VAT
MTD will require companies to review their accounting systems to ensure that they are able to produce quarterly information in sufficient detail to accurately prepare a quarterly tax report.
Businesses, self-employed people and landlords with annual turnovers of less than £10,000 are exempt from these requirements, as are charities, but not their trading subsidiaries.
In order to help the smallest businesses the Government will provide free software, but the majority of businesses are unlikely to be eligible for this assistance and so they should seek outside accounting software providers.
Yielding to pressure from companies, organisations and professionals, the Government has also confirmed that businesses can continue to use spreadsheets to record receipts and expenditure, but that they will need to be linked to software in order to automatically generate and send updates to HMRC.
This is a monumental challenge and businesses need to start preparing for MTD now as they will only have 12 months or so to become familiar with the rules that affect them, before late submission penalties are applied.
Our team at Milsted Langdon is committed to helping businesses and individuals prepare for the changes ahead, this includes the introduction of innovative technology such as our soon to be launched client portal. We will be providing a secure encrypted online place where clients can access, and digitally sign, any documents from anywhere in the world, at any time of the day or night, via our website or Milsted Langdon mobile app.
It will be invaluable for sharing sensitive information and working on documents remotely or in conjunction with us, or indeed, any trusted party.
If you have questions about Making Tax Digital, our portal or our online accounting services, why not contact us to find out more.