Last month HMRC issued 6 consultation documents setting out the first steps in their ambitious plans to implement the Making Tax Digital (MTD) proposals announced in 2015.
The consultation lasts until 7 November with the aim being that the final plan will be published as soon as possible after that date, and for it to be introduced as part of the 2017 Finance Bill.
It has been proposed that by 2020 most businesses and landlords will be required to use software or apps to keep their business records and to provide updates and information to HMRC. This is a clear signal that whilst this may be viewed as a tax measure, at its heart there is a move towards all businesses keeping all records electronically.
MTD is to be introduced in phases, beginning in April 2018 for income tax and national insurance obligations for businesses with a turnover above £10,000. Implementation for VAT and corporation tax obligations are to follow in April 2019 and April 2020 respectively.
This ambitious timetable has been viewed as placing an unfair administrative burden on businesses, particularly smaller ones, drawing criticism from practitioners and professional bodies alike.
HMRC have confirmed that they will not be providing any free software or apps, with taxpayers having to purchase their own.
In light of these and other concerns the Treasury Financial Secretary Jane Ellison recently indicated in a speech that the rollout of MTD for income tax purposes would now be deferred until 2019 for smaller unincorporated businesses to give them time to prepare for the changes.
Whilst we do not have full details as to which businesses will benefit from the extension it is hoped that the threshold will be sufficiently high to give the majority an additional 12 months to implement the necessary changes to meet the MTD requirements.
If you would like to discuss digitalisation of your tax or accounting records, please contact Ian Smith on 0191 2811292.
Should you require any further advice in relation to MTD please do not hesitate to contact either your usual point of contact at Ryecroft Glenton, or Simon Hopwood on 0191 2811292.