MAKING TAX DIGITAL – WHAT YOU NEED TO KNOW
Making Tax Digital (MTD) is an initiative by the Government that will revolutionise the UK tax system to help businesses and individuals keep on top of their affairs and submit correct tax returns. It is an attempt by the HMRC to make tax administration simple, easier to maintain and to be more efficient.
All businesses and individuals have access to their own personalised digital tax account and the HMRC states “HMRC’s ambition is to become one of the most digitally advanced tax administrations in the world”. A digital tax account brings together each taxpayer’s details in one place, just like an online bank account - which in turn means that you can access accounts in real-time.
MTD was first announced in the March 2015 Budget so it’s not new news but when it was first announced, it was supposed to be concentrating on making tax easier and has now turned into a much bigger project than originally anticipated, assessing the whole tax system going back to when Self Assessment was introduced in the 1990’s.
At the moment only businesses with turnover above the VAT threshold (currently £85,000) will have to keep digital records and only for VAT purposes, which will not be compulsory until April 2019. For small businesses and other taxes, making tax digital will be voluntary until at least 2020.
There’s a lot of work to be done by businesses, the HMRC and the software industry to ensure the smooth hand over of this extremely big initiative.
With this mind, the HMRC have provided four foundations of making tax digital:
Better use of information.
Digital tax accounts for all will mean that customers can see the information that HMRC holds and be able to check at any time that their details are complete and correct.
Tax in real time
Our customers should not have to wait until the end of the year or longer to know how much tax they should pay.
A single financial account
By 2020, customers will be able to see a comprehensive financial picture in their digital account, just like they can with online banking.
Interacting digitally with customers
Digital record keeping software will be linked directly to HMRC systems, allowing customers to send and receive information directly from their software.
In conclusion, here is what the Treasury advised under the new timetable given a few months ago:
• 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
• Small businesses will be able to file digitally on a voluntary basis for other taxes.
If you’re a contractor or self-employed freelancer looking for advice on the MTD plans, you can contact our sister company 2020 Accountancy who can provide up to date, business relative advice on a one-to-one basis. Feel free to contact them today.
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