Making Tax Digital Update
The Government has responded to pressure from accountants and other interested parties and announced the delay of Making Tax Digital for Business to 2020 at the earliest, however Quarterly VAT reporting using the new system will be mandatory from 2019.
[Read It's All About Tax - Tax Essentials September Edition for the latest in the tax world]
In a further U-turn, three million small businesses and buy to let landlords below the VAT threshold will now not be required to keep digital accounting records but will be able to move to the new system for keeping tax records at a pace that is right for them. For such businesses, Making Tax Digital will be voluntary.
Mel Stride, the new Financial Secretary to the Treasury and Paymaster General, announced that the roll out for Making Tax Digital has been amended to ensure businesses have plenty of time to adapt to the changes. Under the revised timetable:
- Only businesses with a turnover above the VAT threshold (currently £85,000) will have to keep digital records, and initially only for VAT purposes from 2019
- Businesses will not be asked to keep digital records, or to update HMRC quarterly, for other taxes until at least 2020
As VAT already requires quarterly returns, no business will need to provide information to HMRC more regularly during this initial phase than they do now.
All businesses and landlords will have at least two years to adapt to the changes before being asked to keep digital records for other taxes. This deferral will give much more time for businesses, supported by their advisers, to identify for themselves, at their own pace, the benefits of digital record keeping. It will also ensure that many more software products can be developed and tested before the system is mandatory.
Quarterly VAT Reporting
Whilst many business owners believe that they are already reporting VAT quarterly, currently businesses are only required to complete 9 boxes when they submit their quarterly, monthly, or annual VAT return online. Under the latest proposal for MTDfB the business will be required to submit the detailed transaction data supporting the output tax and input tax figures on a quarterly basis. This will therefore require those businesses affected to keep their accounting records digitally from the 2019 start date.
These changes won’t affect business that are not VAT registered such as buy to let landlords for whom MTDfB will not apply until 2020 at the earliest, and even then only if their gross rental income exceeds the VAT registration threshold.
MTD may affect the legal entity and/or accounting date you choose for your business, therefore if you are considering starting a business or looking to change the legal entity of your business, then download SRK's FREE New Business Kit, designed to help you with the financial, tax and accounting considerations of starting a new business.
Are you thinking of starting a business or changing the legal entity of your business? The form of legal entity you choose can have a significant impact on the way you are protected under the law and the way you are affected by taxation rules and regulations. Join our free webinar on the 5th of October, 2017 - 11am-12pm to learn how to structure your business to success.
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Tags: Making Tax Digital