The April deadline for Making Tax Digital is rapidly approaching so we all need to be prepared, which includes using a software programme compatible with HMRC.
Making Tax Digital will help bring the tax system into the 21st century by providing businesses with a modern, streamlined system to keep their tax records and provide information to HMRC.
Significantly, the roll-out for Making Tax Digital was amended last year to ensure businesses have plenty of time to adapt to the changes.
Under the current timetable:
– Only businesses with a turnover above the VAT threshold (currently £85,000) will have to keep digital records and only for VAT purposes.
– They will only need to do so from 2019.
– Businesses will not be asked to keep digital records, or to update HMRC quarterly, for other taxes until at least 2020.
Making Tax Digital will be available on a voluntary basis for the smallest businesses, and for other taxes.
This means that businesses and landlords with a turnover below the VAT threshold will be able to choose when to move to the new digital system.
As VAT already requires quarterly returns, no business will need to provide information to HMRC more regularly during this initial phase than they do now.
All businesses and landlords will have at least two years to adapt to the changes before being asked to keep digital records for other taxes.
HMRC intends to run a live pilot of the new system in Spring 2018. This will allow for more than a year of testing before any businesses are mandated to use the system.
The Finance Bill will be introduced as soon as possible after the summer recess. This will legislate for all policies that were included in the pre-election Finance Bill, raising over £16 billion across the next five years to fund our vital public services.
The government has also re-confirmed that all policies originally announced to start from April 2017 will be effective from that date.
Better use of information
Ministers believe that Making Tax Digital presents significant benefits for businesses. It will mean that they will not have to give HMRC information that it already has, or that it is able to get from elsewhere – for instance from employers, banks, building societies and other government departments.
Digital tax accounts for all will mean that customers can see the information that HMRC holds and be able to check at any time that their details are complete and correct. HMRC will use this information to tailor the service it provides, according to each of our customers’ individual circumstances.
Tax in real time
Businesses should not have to wait until the end of the year or longer to know how much tax they should pay. HMRC will collect and process information affecting tax as close to real time as possible, to help prevent errors and stop tax due or repayments owed building up.
A single financial account
At the moment most taxpayers cannot see a single picture of their liabilities and entitlements in one place – but this is changing. By 2020, businesses will be able to see a comprehensive financial picture in their digital account, just like they can with online banking.
As your accountants, we will be able to interact with HMRC digitally and at a time to suit them. They already have access to a digital account which will present them with an increasingly personalised picture of their tax affairs, along with prompts, advice and support through webchat and secure messaging. Digital record keeping software will be linked directly to HMRC systems, allowing customers to send and receive information directly from their software.
If you have any concerns about Making Tax Digital please call and we will discuss your situation in confidence.