Making Tax Digital is coming – The end of the Tax return
What is “Making Tax Digital”?
Making Tax Digital (MTD) is a government initiative to modernise HMRC’s tax system, with the aim of making the whole process of administrating tax simpler and more efficient. With the aim being that all of your tax information will be in one place (your digital account) and you will be able to pay tax based on your business activity during the year. Enabling you to upload and update your tax account in real time.
Will it affect me?
If you own a business, are self-employed and pay income tax, national insurance, VAT or corporation tax then it is likely you will be affected. Meaning you will be required to keep track of your tax affairs digitally using MTD compatible software, and to update HMRC at least quarterly via your digital tax account. Eventually this will abolish the annual tax return. This will be the law and there will be penalties for non-compliance.
What do I have to do?
You will need to open and log into your digital account. Everyone will be allocated one through a Government Gateway. Then you will need to ensure your accounting software can update this account at least quarterly. For most businesses, this means a move away from desktop and onto Cloud based accounting software. You are required to choose digital software to maintain your business records and to provide updates of information to HMRC. You will be prompted to send summary updates directly to HMRC – quarterly updates will need to be submitted within a month of quarter end, and an end of year activity report will be due within nine months of the end of the accounting year. As your accountant, we are here to advise you on the software you will need and how to comply with the new quarterly reporting requirements.
When is all this happening?
MTD starts with businesses above the VAT threshold limits (currently £85,000) for accounting periods commencing on or after 6 April 2019. Those affected will be required to keep digital records for VAT purposes. By 2020 it is most likely all other businesses will have to comply.
So, what’s the good news?
We work with a number Cloud software providers to find the best solution for you, ensuring you have a fully compliant accounts package, the benefits of using an online accounts package include:
- It’s in the Cloud so you can get a clear view of your finances any time any place;
- Run your business from work, home or on your mobile;
- It automatically grabs bank receipts and payments in real time; and
- You can use your mobile to photograph purchase invoices and expenses and upload these to the software;
We will be contacting all of our clients throughout 2018 to prepare you and get you ready for Making Tax Digital. There are many software options available to you, please get in touch to allow us to find the best solution for you and to help you with this transition by calling us on 0161 249 5040.
Useful links from HMRC: