Making Tax Digital
There is widespread agreement that Making Tax Digital for business is the right approach for the future. However a number of concerns about the pace and scale of change have been raised. As a result the government has announced that the roll out for Making Tax Digital for Business has been amended to ensure businesses have plenty of time to adapt to the changes.
Businesses will not be instructed to use the Making Tax Digital for Business system until April 2019. This will apply to businesses who have a turnover above the VAT threshold. The smallest businesses will not be required to use the system, although they can choose to do so voluntarily.
The government remains committed to ensuring they can deliver a modern digital tax system for all businesses and their agents. This will support them to get their tax right and reducing the amount of tax lost through avoidable error.
HMRC are confident that businesses will use Making Tax Digital successfully, and to get their tax right the first time. Not only reducing the tax gap, also reducing the cost and worry businesses face when HMRC is forced to intervene.
HMRC recognises that the business population that will be affected by the mandatory changes from April 2019 is diverse. Making Tax Digital will be available voluntary to other businesses, for VAT, Income Tax and National Insurance contributions.
These digital reforms will bring the tax system in line with what businesses now expect from other online service providers. A modern digital experience that helps them get their tax right first time. HMRC anticipates that many businesses that are not mandated from April 2019 will choose to move to the new service.
So What does Making Tax Digital mean for businesses?
Making Tax Digital will provide a more modern, digital service which will help businesses get their tax right.
For Income Tax, businesses (including self-employed and landlords) will be able to keep records of their income and expenditure digitally, and send summary updates quarterly to HMRC from their software (or app) from April 2018 if they choose to do so.
From April 2019, VAT registered businesses (including self-employed and landlords) with turnover above the VAT registration threshold (currently £85,000) will have to:
- keep their records digitally (for VAT purposes only)
- provide their VAT return information to HMRC through Making Tax Digital compatible software
The prompts that will be incorporated into the Making Tax Digital compatible software developed by third party software providers will help eliminate common errors.
Whether part of the mandated VAT population or participating voluntarily, we expect Making Tax Digital to deliver benefits for businesses.
Software will help businesses to stay on top of their record keeping, allowing them and those who represent them to understand better how their business is performing.
Key benefits include:
- always knowing where you stand when it comes to tax
- having access to tax information online in a single place
- being able to work online collaboratively with an agent
- being able to plan and budget more effectively
If you have any questions about Making Tax Digital, you can find more information on www.gov.uk.
You can also drop us an email at firstname.lastname@example.org or call 01799 732188 and we will be happy to help.