Making Tax Digital

Following the snap general election, which took place on 8 June 2017, the Government have now confirmed a new timetable for Making Tax Digital.

Under the new timetable, the following conditions will apply:

  • From April 2019, only businesses with turnover above the VAT threshold (currently £85,000) will be required to keep digital records and only for VAT purposes;
  • businesses will not be required to keep digital records, or to update HMRC quarterly, for other taxes until at least 2020.

For the smallest businesses, who aren’t VAT registered, Making Tax Digital will be available on a voluntary basis. This means that they can choose when they wish to adopt the new practices.

It’s worth noting that, since VAT already requires quarterly returns, no business will need to report to HMRC more regularly than they do now. In addition, with the requirement to keep digital records and update HMRC quarterly for other taxes delayed until 2020, businesses and landlords will have at least two years to become accustomed to the changes.

Read our full blog post, ‘More progress made with Making Tax Digital’ here.

As part of its Making Tax Digital policy, HM Revenue and Customs (HMRC) has said most businesses will be required to use software and apps to keep their records and to update HMRC, on a quarterly basis, by 2020.

The Making Tax Digital ‘Road Map’, first published in December 2015, outlining the governments vision for a completely digital tax system can be found here.

Making Tax Digital signifies a huge change for most businesses, some of whom do not have high levels of digital proficiency, which is why our team of experts here at George Hay Chartered Accountants will be on hand to provide comprehensive support and advice throughout the transition and beyond.

We offer support for cloud based accounting packages and moving online is likely to make the transition to providing digital tax information much easier. Full details of our online accounting services are available here.

The consultations

The consultations on Making Tax Digital were issued in August 2016 and HMRC responded to these in January 2017.

The key points addressed in the first wave of consultations were as follows:

  • HMRC will begin moving businesses to Making Tax Digital from 2018.
  • Businesses will have to report to HMRC on a quarterly basis, but will not have to pay tax on a quarterly basis.
  • HMRC is consulting on the introduction of voluntary pay-as-you-go tax payment.
  • HMRC will not provide any software itself but has said that free packages will be made available.
  • Businesses with an annual income of £10,000 per annum, or less, will be exempt from the changes.

HMRC’s response to these consultations is available to view here and an easy-read summary of the responses can be found here.

Spring Budget 2017

At Spring Budget 2017 the Government announced that, for unincorporated businesses and landlords with turnovers below the VAT threshold, it would defer the mandating of Making Tax Digital for Business (MTDfB) for one year, pushing it back to 2019. This means that around 3.1 million of the smallest businesses will have more time to prepare for the switch to digital record-keeping and making quarterly updates to HMRC.

This also means that only those businesses, self-employed individuals and landlords with turnovers in excess of the VAT threshold, with profits chargeable to Income Tax and that pay Class 4 National Insurance contributions, will be required to start using the new digital facilities from April 2018.

More details relating to this announcement can be found here.

Further details about how Making Tax Digital will operate and how it will affect other types of business including limited companies, as well as individuals, will likely be published in due course.

We will update this page as and when new information is made available, or when we think there is something important that you should know, so please check back regularly.