Like many organisations, HMRC are trying to embrace all things digital, with their current plans called ‘Making Tax Digital’ (MTD). The innovation of MTD has been building for years and has actually been implemented successfully in other countries already. The real question is “How is this going to affect me?”
I answer this question with a significant amount of trepidation, as the answer keeps changing. Originally this was due to have already come into effect for some businesses, with most being affected from April 2018. However, as recently as July, HMRC pushed back the implementation to April 2019, simultaneously narrowing the scope of who this would affect, and reduced the level of reporting. No one is certain that the current timetable and reporting requirements are final, but we do feel we are getting closer to certainty. I shall try to set out some of the headlines as they currently(!) stand:
Many businesses that are above the VAT threshold are already reporting quarterly, so this will have limited affect on them under the current reporting expectation, other than how they maintain their records. The main impact will be on those businesses that are not VAT registered (e.g. financial advisers whose services are often exempt) or the big one, landlords. Under the proposed rules, if you are a landlord and your annual rental income, before any costs, is greater than £85k, you would be required to report under MTD. This is likely to be a big shift in maintaining records for landlords who would normally prepare such records annually for inclusion on their tax returns.
Now many of you reading this might be thinking this is all just a ruse to get me to pay my taxes early. Well, you might not be far off the mark. As part of the early guidance, the quarterly income reporting is intended to give you an indication of your likely tax liability and you can voluntarily make a payment on account towards this liability. This may just be the thin end of the wedge to bring about live tax payments for all businesses and individuals, but at the moment that is something for the future.
These are the only headlines and more detail will be forthcoming in due course. As and when such detail is available, we will aim to make you aware of how it might affect you.
In the meantime, we are working closely with software providers to develop a cost-effective solution for our clients to ensure your compliance with MTD, while keeping it simple and worry-free. If you would like to discuss your accounting software requirements, to ensure you are ready when the new measures come in to force, please do contact us.
Author: Ross Garfitt, Director, Langdowns DFK Chartered Accountants and Business Advisers
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