Making TAX Digital – are you preparing?
HMRC is soon to introduce a fundamental shift in the way UK tax is administered. Making Tax Digital will affect all but the smallest of businesses. A structured, quarterly and digital process is to replace the current system in a move to create ‘real time’ information exchange.
Making Tax Digital will require businesses to record their transactions in such a way that they can be readily summarised and submitted electronically to HMRC. This means that, as a minimum, a spreadsheet (for record keeping), an internet connection and a data storage facility will be required. There will be four quarterly returns due plus a fifth for end year adjustments followed by a final declaration. The precise financial information required is still awaited but HMRC has indicated that only summary totals of income and expenditure will be necessary.
There are no plans currently to link MTD with more frequent payments but this could obviously change in the future.
When is this going to happen? Timescales have recently been put back by a year; the first wave is due to start from 6 April 2019 and will affect self-employed individuals who are VAT registered. This will continue in 2020 with self-employed individuals and unincorporated landlords (for Income Tax and Class 4 NICs). Timescales for limited companies and large partnerships is still to be confirmed but it is unlikely to be before 2020.
Clearly there is much to be digested. Businesses may well need help to determine their start date, assessment of turnover(with multiple businesses or property rentals), choice of appropriate software, etc so it is the right time to begin preparations or seek advice to ensure that you are ready for your start date.