Posted: May 3, 2018
Making Tax Digital (MTD) is the most fundamental change to the administration of the tax system for at least 20 years. This change might seem daunting, but we’ve compiled everything you need to know so your journey into digital tax recording is as easy going as possible.
• Paper records will no longer be sufficient. Almost all businesses and landlords will now be legally required to use digital software or a spreadsheet to keep accounting records.
• Accounting records will be required to be submitted to HMRC directly from accounting software within one month of the end of each quarter.
When does it start?
• VAT – 1 April 2019, only for VAT registered businesses that are above the VAT threshold.
• Income Tax – MTD is expected to become mandatory for income tax reporting, but not before 2020.
• Corporation Tax (limited companies) – the timings have not yet been confirmed, but it won’t become mandatory before April 2020.
What are the exemptions?
• Those who are not able to engage digitally due to age, disability, location (e.g. no access to broadband) or religious reasons.
• VAT registered businesses with a turnover of less than the VAT threshold (i.e. businesses who have registered voluntarily) will be exempt from MTD VAT.
• When MTD is applied to income tax, businesses and landlords with a very small turnover will be exempt. The level of exemption has not yet been set.
What do I need to know now?
Whether or not you’ll be obliged to convert to MTD by April 2019, it’s good to begin preparations as soon as possible, to ensure a smooth transition to the new digital accounting recording requirements.
• Consider whether your business qualifies for a digital exclusion exemption.
• If you’re currently using accounting software, you’ll need to upgrade it to comply with the upcoming requirements.
• If you’re currently keeping your records on a spreadsheet, you’ll need to obtain software that will allow returns and updates to be made directly from the spreadsheets. This is not yet available and there are no details of who will be supplying this or when.
• If you’re currently keeping paper records, you’ll need to acquire and initiate the use of the appropriate software.