Making Tax Digital (MTD) is a government initiative which sets out a vision for a fully digital tax system.
Although the legislation which provides the legal framework for MTD has been delayed until after the election, all individuals and businesses will eventually be required to manage their tax affairs online.
As things stand at the moment (this is a constantly changing picture due to consultations and lobbying by the professional accountancy bodies), there are 3 strands to the proposals:
- HMRC aims to “join up” its internal systems, creating one online account for each taxpayer covering all taxes including income tax, NIC and VAT. This is intended to give up to date information about a taxpayer’s overall tax position throughout the year.
- HMRC will pre-populate some of the figures in the annual tax return (to be re-named the “end of year declaration”) using information which they already receive from third parties such as salary & benefit details from employers, pension details from pension providers and interest details from banks. These figures will need to be checked, supplemented with further information and amended where necessary; we will continue to assist our clients with this annual process.
- Businesses and landlords with turnover/gross rents over £10,000 will be required to submit “quarterly updates” to HMRC summarising income and expenses figures for the quarter. This is to be phased in gradually from April 2018 and there are many details still to be decided by HMRC. However, it is clear that there will still be a requirement to prepare annual accounts in order to reconcile the quarterly updates and make year end accounting adjustments.
This means that the majority of businesses and landlords will be required to maintain digital records using software which is compatible with the MTD programme. This may be in the form of accounting software or an interface between Excel and the MTD programme.
Please rest assured that we will be keeping a close eye on developments, including the timetable for change. We will keep our clients informed and help them deal with the specific aspects of MTD which affect them. In the meantime, if you would like to discuss any aspect of MTD, please call us.