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Making Tax Digital – the latest updates

This time next year, elements of the Government’s Making Tax Digital scheme will be in the process of being trialled.

It’s envisaged that by April 2018, the scheme, which is aimed at modernising the UK tax system by moving it online, will have started to take effect for VAT payments as part of a pilot test. It’s anticipated that Income Tax will follow after 2020.

From April 2019, it will be compulsory for businesses that are above the VAT threshold to keep their records digitally and provide HMRC with quarterly VAT updates.

As with all major initiatives of this scale, the guidelines surrounding Making Tax Digital are being frequently revised, with new details being released by HMRC on a regular basis. Here’s an overview of the latest updates:

  • Businesses with a turnover greater than £85,000 will need to keep digital records from 2019 for VAT purposes
  • Businesses with a turnover greater than £85,000 will only be expected to report data quarterly for the purposes of VAT from April 2019. For other taxes, this will be 2020 or later.
  • Businesses/landlords with a turnover less than £85,000 can keep digital records and report quarterly to HMRC on a voluntary basis.
  • Businesses that are VAT-registered, but are below the VAT threshold will not have to produce quarterly updates or keep digital records, although they can do this voluntarily.

Making Tax Digital is a key part of the Government’s plans to make it easier for individuals and businesses to get their tax right and keep on top of their affairs. While the scheme will apply to all businesses above the VAT threshold, smaller businesses will not be required to use it, although they can choose to use it on a voluntary basis.

For more details about the scheme visit here.

If you would like to discuss the implications of Making Tax Digital or the latest updates on your business or would like more details about the scheme, contact Mike Brown, Software Support Manager, on 01905 777600 or hello@ormerodrutter.co.uk.

Making Tax Digital Update

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.

Have a question on Making Tax Digital? Leave a question or comment below and we can offer you expert advice.

At Ormerod Rutter we understand that finances and taxes can sometimes be confusing. We have 15 expert partners to hand that can offer expert advice on all financial. We pride ourselves on having big firm capabilities and a family firm personality. Have a question or want to discuss your personal or business finances? Give us a call on 01905 777600.

* Please note that all information contained in this article is for informative purposes only and that we cannot be responsible for any errors or omissions from use of this information.*

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