In an earlier blog I discussed the launch of HM Revenue & Custom’s consultation documents on their Making Tax Digital (MTD) proposals. Broadly speaking HM Revenue & Customs are committed to moving the UK tax system forward into the digital age, starting with the requirement for unincorporated business owners and landlords to record their income and expenditure electronically and report to HMRC on a quarterly basis by digital means (by the use of an app or software).
On 31 January H M Revenue & Customs released the outcomes of their consultation. Whilst the outcome documents did not provide as much detail about the new requirements as had been hoped there was clarification of some points. The main points are summarised below:
- For unincorporated businesses and landlords the date for MTD implementation has not been delayed as hoped and will commence from 5 April 2018.
- VAT returns will be brought into MTD from April 2019.
- MTD will commence for incorporated businesses from April 2020.
- The suggested threshold of £10,000 for combined business and property income (turnover not profit) above which MTD quarterly reporting was required was widely felt as being set at too low a level. HMRC are considering further where this level should be set.
- An exemption from MTD is to be made for those that are unable to “engage digitally” taking into account access to broadband, age, remoteness of location and religion.
- An exemption from MTD is to be made to charities (though not their trading subsidiaries) and Community Amateur Sports Clubs. The MTD status of members’ clubs established for their own social or recreational objectives, friendly societies, community interest companies and mutual trading status businesses will be considered further.
- The deadline for quarterly submissions will be one month from the end of the quarter. An annual confirmation report will have to be made no more than 10 months after the end of the accounting period. The good news is that there will be no penalties for late submissions in the first 12 months.
- It will be possible to use spreadsheets in some form to record transaction data, however these must be MTD compliant and submissions will still require some form of app or software.
- Clarification has been given that it will not be necessary to digitally record a copy of invoices and receipts (eg by scanning or photographing) as first feared.
- HMRC have confirmed that free software will be available to businesses with the simplest affairs (although they will not be producing any software themselves). They consider simple affairs to be unincorporated businesses that are not VAT registered and have no employees. As a minimum free software must be able to record transactions and make quarterly and annual updates.
Naturally at Gibbons we will be keeping ourselves up to date with these requirement as they are confirmed and looking into the suitability of software released to help our clients get to grips with the new processes so watch this space for future developments.