Making Tax Digital (MTD)
MTD will be with us in April 2018; there are still critical gaps in the information available but the outline of the story so far:
Who is affected? Initially any unincorporated business or landlord with an annual turnover of more than £10,000 – this is the threshold proposed by HMRC in its consultation paper, in their response it says that its decision on the threshold has been deferred until later this year so it could be more than £10,000.
When? The obligation to make MTD submissions will begin for the accounting period starting in 2018/2019. In the consultation HMRC suggested that it might defer smaller businesses for a year. Again, a decision is yet to be made so we don’t know if a deferral will apply and if it does what the threshold will be. Partnerships with a turnover over £1m will not have to make submissions until 2020.
Record keeping. Records will have to be maintained digitally using software (including spreadsheets), the presumption is that records will be maintained in real time and submission deadlines have been set using that assumption.
Filing obligations. Businesses and landlords will have to make quarterly “updates” of accounting information within one month of the end of the quarter. Updates can be made more frequently (say monthly) but only as subdivisions of a quarter. There is then an “end of year activity” in which technical adjustments are made; this “activity” must be carried out by the sooner of ten months after the end of the accounting period or 31 January following the year of assessment in which the profits of the accounting period are taxed.
Mechanics. The updates must be made using software, either accounting software by the taxpayer or their accountant or via the accountant’s tax submission software.
Sound Complicated? With the number of things still to be confirmed it is. But don’t worry, your AIMS Accountant can help.