Bird & Co Newsletter – September 2017 MTD (update 14 July 2017)
Making Tax Digital
End of the Self-Assessment Tax Return – Good News?.
The government has announced major changes to its Making Tax Digital for business (MTD) proposals: MTD will initially only apply for VAT registered businesses and will be mandated into HMRC’s plans for quarterly bookkeeping and reporting from April 2019. MTD will not become compulsory for other business or taxes until April 2020.
Proposed updated timetable:
- VAT registered businesses, with turnover over the VAT threshold will be mandated into the MTD reporting system from 2019;
- Property landlords and small business trading below the VAT threshold will join MTD from 2020, although they may opt in to MTD earlier if they wish to do so.
- There is no news on what is proposed for companies, however the government is currently looking at reform of corporation tax.
|2019||VAT||Self- employed individuals who are VAT registered||Business with a turnover of less than £10,000
Business engaged in excluded activities
The Digitally Excluded
|2020||Income tax & Class 4 NICs||Self-employed individuals and landlords|
Income tax & Class 4 NICs
The government says that it has listened to concerns raised by parliamentarians, in particular the Treasury Select Committee, businesses and professional bodies about the pace of change and is taking steps to ensure a smooth transition to a digital tax system.
Mel Stride, Financial Secretary to the Treasury and Paymaster General said:
‘Businesses agree that digitising the tax system is the right direction of travel. However, many have been worried about the scope and pace of reforms.
We have listened very carefully to their concerns and are making changes so that we can bring the tax system into the digital age in a way that is right for all businesses.’
HMRC has already begun piloting the MTD services and will continue to do so. It will start to pilot MTD for VAT by the end of 2017 with a live pilot starting in Spring 2018.
These changes will be legislated for as part of the Finance Bill 2017.
Changes to VAT reporting will come into effect from April 2019. From that date, businesses above the VAT threshold have to provide their VAT information to HMRC through Making Tax Digital software.
We believe that, for most clients, MTD will be a positive transition, which should simplify reporting, making taxation more efficient and accurate through the use of digital tax accounts – we just have to get over the transition period. How we manage and budget for this change will depend on the software available, and we will be working closely with our clients to ensure a smooth transition.