MacDougall & Co
Chartered Tax Advisers

Loading

 

Making Tax Digital (or MTD)


Making Tax Digital is coming


Making tax digital (MTD) will affect you and the way you keep records if you

    are self employed
    have income from lettings
    control your own limited company, or
    are in partnership

MTD will not apply to you if you

    are an employee with any number of employments, with
    income from dividends,
    interest and
    similar sources of income

    MTD will also not apply to you if your gross self employed income and lettings income (before any expenses) total less than 10,000 a year (this figure may be higher at first. We may learn more in the budget).

MTD requires that you

    keep DIGITAL records
    make quarterly returns to HMRC, as well as
    make a final fifth return (the equivalent of a tax return)

    Note
    It seems likely that 'three line accounts' figures will be submitted quarterly, (turnover, total expenditure and profit). Accuracy, in terms of 'financial accounts' will not be necessary. These quarterly figures will be raw data posted from your records.

    Only the fifth set of figures will be corrected / amended / changed to produce 'financial accounts'. Your tax liability will be worked out from these final 'financial accounts'.

    HMRC hope that you will choose to pay tax on account as you go. This is not (yet) a requirement.

    Many people will be free to choose standard accounting or cash accounting. Although much easier and straightforward at first sight, cash accounting has very expensive disadvantages for certain businesses. Always get advice from a suitably qualified person before deciding.

The new rules will apply to different 'people' at different times

    self employed - from your first accounting period starting after 5 April 2018
    landlords - from your first accounting period starting after 5 April 2018
    partners - from your first accounting period starting after 5 April 2018
    partnerships and limited liability partnerships - from your first accounting period starting after 5 April 2018
    partnerships with a turnover of more than 10 million- from April 2020
    limited companies - from April 2020

But, see note in red, below.

This means that

    if you're self employed with a year end of 31 March, you don't need to join MTD until 1 April 2019
    if you're self employed with a year end of 5 April, you need to join MTD on 6 April 2018 ... almost a year earlier
    if you're a landlord your year end is 5 April (by statute) so you need to join MTD on 6 April 2018

In March 2017 the Chancellor announced a delay of one year for those businesses with a turnover under the VAT limit.
BUT, (at 26 April 2017) these clauses have been scrapped in the 'wash up' before parliament is dissolved for the general election. However, I expect that these clauses will return after the election.

However, you can join earlier, if you wish.

When must figures be submitted?

    Quarterly returns
    each quarter runs for exactly 3 months. The first quarter starts with your first day of the year
    if your year end is 5 April, your first quarter starts on 6 April and ends on 5 July
    you then have one month in which to submit your quarterly return, so that would be 5 August in this example
    you cannot change your quarters, but you can change your year end and this (in turn) will change your quarters
    there will be no penalties for inaccuracy (quarterly returns), but there will be penalties for failing to submit on time
    you can make returns more frequently than quarterly ... however, you may be penalised if you miss a submission date (for example, by submitting every two months you would fail to submit the third month within the one month deadline)

    The fifth return
    must be submitted (broadly) by 31 January following the end of the tax year (much like your tax return)
    must be accurate (just like your tax return)

And the future ??
It seems likely that the long-term plan is that the self employed and landlords pay their tax monthly. This is some time off, but it's probably on its way. Monthly figures, submitted automatically by software that downloads and analyses your bank statements, will also help the government with 'Universal Credit', which requires monthly income figures to ensure that recipients get what they need when they need it. Each of these software components is already inexpensively available.

Each reference to a 'landlord' on this page means an individual (or unincorporated) landlord.

Please do contact us if you have any questions.

Believed correct at time of writing, 23 February 2017. The rules relating to MTD are not yet finalised and may change materially. The information on this page cannot replace advice. Always get advice from a suitably qualified person before taking action or refraining from taking action.


 
tax faculty logo
Certified CPA loco

Quickbooks logo

Free Agent logo CIOT logo

Contact Us: Telephone 074 03 04 05 06 or 01727 86 86 01    Email or    Skype Us   Disclaimer

 
© www.PayLessTax.co.uk Ltd 1999 to date
Website designed by InTouch WebDesign