The UK government’s response to the Making Tax Digital consultations has finally been published and has broadly been welcomed by business leaders and the tax profession.
With the exception of a very few, it is expected that all businesses will be required to hold their accounting records digitally and submit quarterly updates to HMRC. In addition to this, an end-of-year reconciliation will be required to ensure all financial activities have been recorded.
Criticisms of the report have focused on the short timeline for further consultations for the legislation and also the cost of transition during the first year.
The government will continue to consider issues contained in the report, such as the exemption threshold, so the features in the report are not a finalised list of changes.
Here is a list of some of the proposed decisions for Making Tax Digital:
- Businesses will be able to continue to use spreadsheets for record-keeping, but they must ensure that their spreadsheet meets the necessary requirements of Making Tax Digital for Business – this is likely to involve combining the spreadsheet with software
- Businesses eligible to use ‘three line accounts’ will be able to submit a quarterly update with only three lines of data (income, expenses and profit)
- Free software will be available to businesses with the most straightforward affairs
- The requirement to keep digital records does not mean that businesses have to make and store invoices and receipts digitally
- Activity at the end of the year must be concluded and sent either by 10 months after the last day of the period of account or 31 January, whichever is sooner
- Charities (but not their trading subsidiaries) will not need to keep digital records
- For partnerships with a turnover above £10 million, Making Tax Digital for Business is deferred until 2020
You can view the full report here
Due to the overwhelming response to the initial consultations, the government is taking more time to consider issues raised alongside fiscal impacts.
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