Making Tax Digital (MTD)
Announced in the spring 2015 Budget, by the then Chancellor George Osbourne, the premise of HMRC’s Making Tax Digital (“MTD”) initiative is to modernise the UK tax system by 2020, through the enhanced use of digital data, making HMRC one of the most efficient tax authority in the world. Making Tax Digital is set to revolutionise the UK tax system and bring an end to self-assessment from April 2020.
HMRC’s main principle aim of Making Tax Digital is to make tax administration more effective, efficient and easier for taxpayers through the implementation of a digitalised tax system by 2020, whilst also reducing its overheads for managing tax affairs.
These changes can also apply to a wide range of taxpayers, including most businesses, self-employed professionals and landlords. This ‘new and improved’ tax system will require the majority of business owners to maintain digital records using compatible software.
What is Making Tax Digital?
Through HMRC the UK Government,is modernising the UK tax system and replacing current tax returns with online digital tax accounts for millions of businesses and individuals alike. A digital tax account brings together each taxpayer’s details in one place, just like an online bank account, so they can view their tax affairs in real-time, update their information, register for new services, see at-a-glance how their tax is calculated, and see a list of payment options.
What is the timeline for Making Tax Digital?
The initial timeline for the implementation of Making Tax Digital was outlined HMRC, initially self assessment tax returns would end on 5 April 2018 and will be replaced by digital tax accounts. The initial timeline of implementation:
- April 2018 – Making Tax Digital Go Live – Income Tax
- April 2019 – Go Live – VAT
- April 2020 – Go Live – Other Taxes
What are the reporting requirements?
On Friday 14th July 2017, HMRC issued a revised timetable for the implementation of Making Tax Digital, The introduction will begin in April 2019, HMRC expects only VAT registered businesses to keep digital records and only for the purposes of VAT; other businesses will no be asked to maintain digital records or update HMRC quarterly for other taxes until 2020.
This news means that there will be at least another a years’ delay for everyone, since Making Tax Digital was originally due to start to take affect in April for business with turnover over £85,000.
This new timetable will allow sufficient time for the software industry to test and implementation of their systems given the scope of the changes that are been mandated by HMRC.
Will my accountant still be able to report on my behalf?
Under the new regime, accounts/agents will have “Agent Access”. Which will enable taxpayers to authorise their accountants or agents to access their digital tax account; who will then be able to submit the quarterly reporting on behalf of their clients.
Will HMRC be providing Making Tax Digital (MTD) software?
HMRC will not be providing software for Making Tax Digital. However HMRC is working in consultation with software developers on what software is required and how this requirement best be met.
Here at ABS Accountancy, we’re keeping an close eye out for any further developments from the Government in regarding to Making Tax Digital.
We expect these to be included in the for coming Finance Bill, currently scheduled for publication sometime this next month, we also expect some sort of announcement in the Chancellors next budget, currently scheduled for 22nd November 2017.
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