Whilst we know that due to the election Making Tax Digital was dropped from the Finance Bill, we also know HMRC has said it will be back as soon as the elections are over!
The plan is that by 2019 VAT returns will be abolished for businesses including the Self Employed, Landlords and Partnerships.
But don’t start celebration too soon, they are being abolished because we will be providing more information each quarter online to HMRC.
Interestingly HMRC say they may be able to accept spreadsheets if they meet specific criteria, but realistically, surely everyone should now be using online accounting software. DIY spreadsheets are not the best way to keep your accounts and there is a high risk of error.
Why create your own spreadsheet when you can get software like Sage One Start for £6/mth or you might get an even better deal if you ask a Sage One Accountant.
So what is the expected timetable for Making Tax Digital
- April 2018 – quarterly reporting for income tax purposes for unincorporated businesses with a turnover over £85,000
- April 2019 – quarterly reporting for both incorporated and unincorporated businesses for income tax and VAT
- April 2020 – quarterly reporting for corporation tax purposes
2018 is just the beginning as Sage explain …
What Making Tax Digital really means
- All self-employed individuals, landlords and incorporated entities with business income over £10,000 will be required to keep digital records of all their income and expenditure and submit these records electronically to HMRC. Those in employment who have secondary income of more than £10,000 per year through self-employment or property will also be affected.
- HMRC will not provide you with the tools for digital record keeping and submission. These will be offered through commercial software providers.
- Those affected have the option to make the electronic submission in collaboration with their accountant or bookkeeper or can do this on their own.
- Updates to HMRC will need to be made at least quarterly, taxpayers will have an option to pay tax based on their quarterly submissions, if they wish.
- Any activity at the end of the year must be concluded and sent either by ten months after the last day of the accounting period, or by 31st January, whichever is sooner.
The truth is, we don’t know exactly what the rules will be until the bill is drafted which won’t be till after the election, but what we do know is that big changes are coming!