HMRC’s Making Tax Digital – Are you ready?
2/11/2017 - Whiting & Partners
Richard Alecock from Whiting & Partners, explains the changes HMRC is bringing in and what businesses need to do to stay ahead of the game.
Making Tax Digital (MTD) is HMRC’s initiative to bring the UK’s taxation system into the digital age and is one of the biggest overhauls in the history of UK Tax.
It started with the implementation of the Personal Tax Account and Real Time information (RTi) changes to Employers and Employees. The next step requires businesses and landlords to keep their record in an electronic format and to submit quarterly returns of real time accounts information.
HMRC’s ambitious timescale has already been delayed which is a positive move as there was a danger that rushing the changes through could easily end in disaster.
The businesses first being mandatorily brought in to the new regime, from April 2019, are those that are already used to making quarterly reports to HMRC, namely those businesses which are registered for VAT. But, these businesses may not as yet be keeping their records in an electronic format.
All other businesses have a revised starting date from April 2020 which gives them time to find and test the correct solution for them so that the new requirements can be met.
Under the new timetable:
- only businesses with a turnover above the VAT threshold (currently £85,000) will have to keep digital records and only for VAT purposes
- they will only need to do so from 2019
- businesses will not be asked to keep digital records, or to update HMRC quarterly, for other taxes until at least 2020
MTD will be available on a voluntary basis for the smallest businesses, and for other taxes. Which means that businesses and landlords with a turnover below the VAT threshold will be able to choose when to move to the new digital system.
Over the last few months, we have been running MTD roadshows guiding our clients and guests through the implementation timeline and, most importantly, offering solutions for those unused to quarterly returns.
The greatest challenge will be to those that do not already operate an electronic bookkeeping system. Cloud Accounting packages including Xero, Quick Books, FreeAgent and Sage are already hosting huge numbers of businesses and allow them to access up-to-date accounting information at any time, from any device, and anywhere with an internet connection.
It’s sensible to plan to start using an online system from the next tax or financial year as this will allow time for familiarisation so that any issues can be ironed out prior to the mandatory implementation date.
Cloud solutions remain in pole position providing seamless interaction with accountants and advisers plus the possibility to be as online and digital as you like with a world of apps and add-ons at your fingertips. The Cloud also allows your accountant to securely and remotely access the same data so they are on hand to offer immediate support, check your accounts at any point and assist you in extracting the necessary information required to be submitted online to HMRC.
For further information, contact Richard Alecock at Whiting & Partners.
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