Are you still a little fuzzy when it comes to Making Tax Digital– what’s it all about and does it affect your business? Fear not, as we’ve condensed all our MTD posts from the last two years into one Making Tax Digital Timeline. If you just want to know where things are up to presently then skip to the end! There, panic over.
The Making Tax Digital Timeline
George Osborne announced the introduction of digital tax accounts in his 2015 Budget
By 2020 HMRC expected that a full range of services would be available to tax payers through their digital accounts.
The introduction of quarterly reporting by businesses and landlords via cloud accounting software is set for 2018.
Accountants and businesses begin voicing concerns about the timescale and lack of consultation.
HMRC published six consultation documents on Making Tax Digital.
It had been planned that self-employed taxpayers and landlords would be required to keep their business records digitally. They would then need to submit information to HMRC on a quarterly basis.
HMRC entitled their project Making Tax Digital for Business.
Under MTDfB, businesses, self-employed people and landlords would be required to maintain their records digitally through software or apps. Summary information would be reported to HMRC quarterly through their ‘digital tax accounts’ (DTAs)
Businesses, self-employed people and landlords with turnovers under £10,000 were told they’d be exempt from these requirements.
The Government started to slow their role…
Ahead of the general election, MTDfB was put on hold.
The Treasury select committee MPs argued that £10,000 was too low for a revenue threshold. Also, that there should be a comprehensive pilot before it is made mandatory for all businesses above a certain revenue threshold.
The government announced the delay of MTDfB to 2020 at the earliest.
Quarterly VAT reporting using the new system would be mandatory from 2019.
Three million small businesses and buy to let landlords below the VAT threshold would not be required to keep digital accounting records until at least 2020.
Only businesses with a turnover above the VAT threshold (£85,000) were told they had to keep digital records. Initially, only for VAT purposes from 2019.
MTD for VAT draft legislation was published with examples of how business account records might link with HMRC’s to comply. The legislation specified that “functional compatible software” must be used to record and preserve prescribed VAT related data.
The pace was set…
HMRC confirmed that no further MTD for business changes will be brought in before 2020 at the earliest.
The HMRC statement noted that the convergence of business taxes onto a single system should happen at a slower pace. This will slow the creation of the single account for all business customers.
For individuals, the introduction of further digital services was delayed. The progress on simple assessments and real time tax code changes was put on hold.
HMRC issued their detailed guidance on the digital record keeping and return requirements for MTD for VAT.
The VAT notice is essential reading for all VAT registered businesses.
Making Tax Digital Timeline
MTD as of October 2018:
- MTD for VAT is still scheduled to commence in April 2019. Its applies only to those VAT registered businesses with turnover above the £85,000 VAT threshold. This includes sole traders, partnerships, limited companies, non-UK businesses registered for UK VAT, trusts and charities.
- For these businesses, paper records will cease to meet the legal requirements in tax legislation. Maintaining digital accounting records will be mandatory. The current HMRC online tax return services will be withdrawn.
- Other businesses will not be asked to keep digital records, or to update HMRC quarterly, for other taxes until 2020. Further details have yet to be announced.