Are you prepared for Making Tax Digital?
In his Spring Budget, Chancellor, Philip Hammond, announced that Making Tax Digital (MTD) would become a reality and would start to be implemented from April 2018.
However, since then the policy has faced a number of setbacks, including its initial withdrawal from the Finance Bill 2017, before being re-introduced to the Finance Bill 2017-19.
The Government has confirmed that businesses with a turnover above the VAT threshold (£85,000) will have to keep digital records and report them on a quarterly basis, but initially only for VAT purposes, starting from 2019 – delaying the roll out date by more than a year and exempting a large number of sole traders, landlords and micro-businesses.
After this date businesses will not be asked to keep digital records, or to update HMRC quarterly, for other taxes until at least 2020.
For other businesses below the threshold, Making Tax Digital will be available on a voluntary basis. This means that businesses and landlords will be able to choose when to move to the new digital system.
The Government will start testing the system on a small scale at the end of 2017, before running a live pilot in spring 2018 for a limited number of businesses.
Despite the various changes to Making Tax Digital, it is important that businesses and individuals understand the implications of the new regime for them.
This is the biggest change to the UK tax system since the introduction of Pay-as-you-Earn in 1944.
For the first time ever, HMRC are insisting that your records are kept digitally and that the software you use has the ability to submit quarterly information direct to HMRC.
To help you understand what Making Tax Digital means for you and your business, we answer the most frequently answered questions here.
In the meantime, if you have any further questions or would like to know how you can prepare for MTD, please do not hesitate to contact the team at Milsted Langdon.