Making Tax Digital – Update

HMRC are continuing with Making Tax Digital. Find out what they have planned…

HMRC are continuing with their plans of ‘Making Tax Digital’ and have now published a summary of responses to the representations submitted to the various Making Tax Digital consultations last August.

The dates for the phased introduction of MTD are still the same:

  • April 2018 for Income Tax
  • April 2019 for VAT
  • April 2020 for Corporation Tax

However, for partnerships with a turnover exceeding £10m, MTD will be postponed until 2020 due to the complexity of their tax affairs.

Also, all self-employed businesses and landlords with a turnover less than £10,000 a year will not have to adopt MTD, unless they so choose.

Those in employment as well as pensioners will also be exempt from MTD, unless they have secondary incomes greater than £10,000 a year from self-employment or property.

HMRC have not yet made a final decision concerning the potential delayed start, of one year, of small businesses and landlords with income in excess of £10,000 per year.

Businesses will still be able to use spreadsheets to record income and expenditure, and they will be able to link this to compatible software which can automatically generate and send updates to HMRC.

Those eligible for three line accounts will be able to submit a quarterly update with only three lines of data i.e. income, expenses and profit.

Businesses which have a genuine reason for not being able to get online due to individual circumstances, such as disability or geographical location, will be exempted from MTD.

These changes will impact most businesses, including 3.3 million self-employed, 1.6 million companies, over 400,000 ordinary partnerships and about 600,000 businesses with income from different sources, for example property and self-employment.

Lastly, HMRC believe that MTD will push a reduction in the tax gap. According to Jim Harra, Director General for Customer Strategy and Tax Design at HMRC:

We know that the majority of businesses want to get their tax right first time, but the latest tax gap figures  show that too many find this hard, with more than £8bn a year lost in tax as a result of avoidable taxpayer error by small businesses.’

We will continue to research Making Tax Digital and we will try to keep all of our clients updated on this as new information comes to light. As always, should you have any questions or queries, do not hesitate to get in contact with us.