So what does Making Tax Digital mean to you as a taxpayer?
Under the current regime unincorporated businesses, self-employed people and landlords submit their tax return, with a summary statement confirming their income, expenses, profit/loss, income tax and NIC liability once a year. Tax returns in paper form are required to be submitted to HMRC within six months after the tax year end 5 April (i.e. by 31 October). Electronic tax returns submitted on-line to HMRC must be received by 31 January following the tax year end 5 April.
With MTD businesses, self-employed people and landlords will be required to start using the new digital service to provide HMRC with periodic updates of specified information every three months. For most people there will be four updates for each relevant period. Businesses, self-employed and landlords will be required to provide in addition to the four updates, an end-of-period statement for a relevant period in order to finalise their taxable business profits or losses. The statement will need to be provided by the earlier of 10 months after the end of the period to which the statement relates or the 31 January following the tax year in which the relevant period ends.
In a nutshell, instead of submitting one tax return taxpayers subject to MTD will have to make four updates using digital software to HMRC. In this Newsletter, we provide information on making tax digital for individual taxpayers to enable you to understand how the new regime would affect reporting of your tax affairs in the future.
What are the:
• Qualification thresholds?
• Entities exempt from MTD; and
• HMRC’s time line for implementing the new regime
Qualification thresholds and HMRC implementation time line
• Unincorporated businesses, self-employed people and landlords that have income above the VAT registration threshold currently £85k will start using MTD in April 2018;
• Unincorporated businesses, self-employed people and landlords with income £10k up to the VAT registration threshold currently £83k will be required to start using the new digital service from April 2019;
• Entities that pay corporation tax will start using MTD in April 2020
Exempt Entities
HMRC has said that ‘Individuals in employment and pensioners will not have to use the digital service unless they have secondary incomes of more than £10k from self-employment or property’.
Charities (but not their trading subsidiaries) will not be subject to the MTD regime.
As a professional service firm, we are preparing for the introduction of MTD by working with our Account Production and Tax software service provider to ensure that we have the processes and tools ready well before the onset of the new regime in April 2018.
We will call you in due course to discuss how MTD is likely to affect you, the actions you need to take with regards to business record keeping to ensure that you too will be prepared for the transition from the current tax reporting regime to MTD.
If in the mean time you have any questions about MTD or wish to discuss any other issues relating to your business, please call us on 020 8688 2347.
Enjoy spring;
