Making Tax Digital with M J Smith & Co
Making Tax Digital is coming and we at M J Smith & Co are prepared for the first implementation commencing April 2019. We are using the latest software including Xero and Quickbooks and other cloud-based technologies as well as in-house systems to link directly with HMRC for seamless integration into quarterly accounting. Please see our bookkeeping page
Who is likely to be affected?
Businesses, self-employed people and landlords will be required to start using the new digital service from:
- April 2019, if they have profits chargeable to Income Tax and pay Class 4 National Insurance contributions (NICs) and their turnovers are in excess of the VAT threshold currently £85,000.
- April 2020 if they have profits chargeable to Income Tax and pay Class 4 NICs and their turnovers are below the VAT threshold
- April 2020 if they are registered for and pay VAT
- from April 2020 if they pay Corporation Tax (CT)
Businesses, self-employed people and landlords with turnovers under £10,000 are exempt from these requirements.
Those in employment who have a secondary income of more than £10,000 per year through self-employment or property will also be required to use the digital service but no date has yet been set.
The government announced at Spring Budget 2017 a one-year deferral from the mandating of Making Tax Digital for Business (MTD) for unincorporated businesses and landlords with turnovers below the VAT threshold. This means that only those businesses, self-employed people and landlords with turnovers in excess of the VAT threshold with profits chargeable to Income Tax and that pay Class 4 NICs will be required to start using the new digital service from April 2018.
General description of the measure
The government recognises that the majority of businesses want to get their tax right, but the latest tax gap figures published by HMRC show that too many otherwise compliant businesses find this hard, even some who use an agent to help them. As a result over £8 billion, a year in tax is lost from avoidable taxpayer errors.
This not only costs the public purse, it also causes businesses cost, uncertainty and worry when HMRC is forced to intervene to put things right.
HMRC wants to do more to help businesses get their tax right and these changes are a very important step in that direction. It will help businesses steer clear of avoidable errors, and give them a clearer view of their tax position in a year.
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).
Those who genuinely cannot get online due to their individual circumstances such as disability, geographical, or other reasons, will be exempted from these obligations.