6 ISSUES FOR JUST £6 Subscribe to Business & Professional Life today CLICK HERE

Making Tax Digital – are you ready?

PUBLISHED: 13:57 09 July 2018 | UPDATED: 13:57 09 July 2018

Lucinda Davenport of Crowthers

Lucinda Davenport of Crowthers

Archant

Lucinda Davenport of Crowthers Chartered Accountants explains how businesses owners and individuals can prepare for the upcoming digital revolution of tax

In July 2017 the government announced a new initiative called Making Tax Digital, with the aim of modernising and creating a more efficient tax system for businesses, the self-employed, and landlords in the UK.

The VAT element of Making Tax Digital will come into force in April 2019 (with MTD for income tax expected to launch in 2020), so it is key for self-employed individuals, landlords and business owners, with gross turnover and/or rents over £10,000, to know exactly what the initiative means for them.

Crowthers Accountants Cheltenham Office - (l to r) Crowthers directors Sophie Howard, Jonathan Crowther, Nikki Walding, Ian Cooke and Sara Crowther at the new Cheltenham office (c) Antony Thompson/TWMCrowthers Accountants Cheltenham Office - (l to r) Crowthers directors Sophie Howard, Jonathan Crowther, Nikki Walding, Ian Cooke and Sara Crowther at the new Cheltenham office (c) Antony Thompson/TWM

What will MTD entail?

Records will have to be kept digitally and taxpayers will have to send quarterly updates with summaries of income and expenditure to HMRC. The requirement will be to submit the update within one month after the quarter end. Year-end finalisation of trading results will be required by either 10 months after the end of the accounting period, or January 31 following the year of charge of the profits – whichever comes first.

MTD will benefit businesses in a variety of ways:

● Individuals will no longer have to give HMRC information that it already has or can easily get from employers, banks, other government departments, etc.

● The information that HMRC holds will be easily accessible for individuals to check that their details are complete and correct.

● HMRC will collect and process information affecting tax as close to real time as possible, so there is no need for individuals to wait until the end of the tax year to find out how much they expect to pay.

● Individuals will be able to interact with HMRC digitally and at a time to suit them.

● By 2020, individuals will be able to see an extensive financial picture in their digital account, just like online banking.

Process

Digital record-keeping means either using MTD-approved accounting software or spreadsheets in conjunction with other software, which use APIs, to allow a flow of data from the business to HMRC (and vice versa). Transactions will need to be analysed in accordance with the categories on the current self-assessment return. Businesses will not be required to keep digital copies of their receipts – it is the transactions that need to be stored digitally.

Key dates

For businesses with turnover that exceeds the VAT threshold, MTD obligations for VAT start with effect from the first VAT return period, beginning on or after April 1, 2019. VAT returns for these businesses will have to be filed using third-party commercial software; there will be no keying-in of values into HMRC’s online VAT100 form. VAT-registered businesses with turnover below the VAT threshold can opt-in to MTD for VAT.

MTD for income tax will not be mandated until April 2020 at the earliest; obligations are likely to begin with effect from the first accounting period beginning after April 5 of the relevant tax year that MTD for income tax is introduced.

In practice

Crowthers Chartered Accountants has already moved a large number of clients’ VAT work to a digital system to prepare for MTD and has partnered with KashFlow Accounting Software to provide a cloud-based accounts package solution. This move has helped Crowthers to focus on tax planning for our clients, as records are more accessible and kept up-to-date.

For more information, visit the Crowthers website.

1 comment

  • Good that you are helping to build awareness of this, but I have a couple of comments to make. Not sure what the gross turnover andor rents over £10,000 has to do with MTD for VAT (2nd para), you correctly note in a later paragraph that the relevant threshold is the VAT registration threshold (currently £85,000). When you mention "quarterly updates" under "What will MTD entail?" do you mean the VAT return? Voluntary updates and supplementary data for VAT are not compulsory. If it relates to income tax, then this is unclear. In terms of key dates, please also note that there is a second key date for VAT, i.e. the end of the 'soft landing' period. From April 2020 anyone running more than one software package to build up the VAT return will need to have 'digital links' between them. It is unfortunate that the final edit of the article has made it a little muddled as it will only confuse people trying to contend with an already difficult issue. I would recommend in future that the publication look for a VAT specialist to advise on what is ostensibly a VAT matter (at least for now).

    Report this comment

    Kotswold

    Tuesday, August 7, 2018

The views expressed in the above comments do not necessarily reflect the views of this site

More from Cotswold Life

Neil and Alison Smith wanted a project, but then their old coach house began to reveal its interesting little glitches

Read more
Wednesday, October 17, 2018

Taking over the reins on a well-established 50 year old family business, third generation family member Matt Cleevely has taken his own passion for sustainability and put in place a business vision that marries the heritage of Cleevely Motors and a future commitment to all things electric

Read more
Wednesday, October 17, 2018

He quit his job with a few thousand pounds in savings and an empty garage. In less than a year, Nick Grey’s technology company Gtech was flying. Tanya Gledhill meets him

Read more
Tuesday, October 16, 2018

From food and farming champions to expert retailers, design houses to haulage companies, the old guard to the new kids on the block, we are lucky to count them among our numbers and applaud the contribution they make to the Cotswolds’ business landscape

Read more
Tuesday, October 16, 2018

Did you attend the opening of Lodders’ new office in Cheltenham? If so, you could be in our social photos...

Read more
Tuesday, October 16, 2018

“It’s important to keep investing in new equipment, not only to meet demand but to also maintain the high quality of our packaging that our customers rely on.”

Read more
Tuesday, October 16, 2018

Crowe, the national audit, tax, advisory and risk firm, has acquired a Gloucestershire accounting business that specialises in helping entrepreneurs

Read more
Tuesday, October 16, 2018

I send this postcard from Cirencester, complete with the discoveries and viewpoints from four members of my family – both the young and not so young

Read more
Tuesday, October 16, 2018

Of all the castles in the region, none have seen as much war, romance and royalty as Sudeley over its dramatic 1,000-year history. And with such a colourful and eventful past, it is easy to see why some people believe there could be spirits from bygone eras which still wander the halls and corridors to this day

Read more
Tuesday, October 16, 2018

‘If its autumn in Gloucestershire, then it must be time for Apple Day when we celebrate cider’

Read more
Monday, October 15, 2018

What started as a business ploy by one Cotswold firm has developed into an inspirational garden

Read more
Monday, October 15, 2018

The weekend is fast approaching and for those still deciding how to spend their Friday through to Sunday, we pick 5 of the best ways to spend your weekend in the Cotswolds

Read more
Monday, October 15, 2018

‘What meal would you choose, if you could only ever eat that meal three times a day forever and day?’

Read more
Friday, October 12, 2018

Here’s our pick of some of the very best chefs from our local pubs, restaurants and hotels in and around the Cotswolds and sharing their advice and tips on how they made themselves and their businesses successful

Read more

Newsletter Sign Up

Sign up to the following newsletters:

Sign up to receive our regular email newsletter

Our Privacy Policy

Latest Competitions & Offers

Topics of Interest

Food and Drink Directory A+ Education

Subscribe or buy a mag today

subscription ad

Local Business Directory

Property Search