Making Tax Digital – Where are we now?

The government’s landmark Making Tax Digital (MTD) for business initiative is set to take effect from 1 April 2019, beginning with MTD for VAT. With ongoing changes to guidelines, dates and what’s included, we take a look at the latest position, and consider the recent delay to some of HMRC’s new digital services.

MTD for business: an overview

The MTD for business initiative was originally set to be implemented between 2018 and 2020 – however, concerns were raised in regard to the pace and scale of the changes’ and a revised timetable for the introduction of the initiative was put forward.

Under this timetable, beginning from 1 April 2019, businesses with a turnover above the VAT registration threshold (currently £85,000) will be required to keep digital records for VAT purposes and submit VAT returns to HRMC using MTD functional compatible software. If a business’s turnover subsequently falls below the VAT registration threshold, the MTD requirement will remain.

VAT returns must be calculated and submitted to HMRC using an Application Programming Interface (API), and submission can be from software, bridging software or API enabled spreadsheets.

Keeping digital records and making quarterly updates will not be compulsory for taxes other than VAT before April 2020. Since April 2018 HMRC has been live piloting MTD for VAT.

HMRC anticipates that there will be a one-year ‘soft-landing’ period when penalties for incorrect bookkeeping under the new initiative will not apply.

A business can choose to submit VAT information more frequently than the VAT return obligations require.

Delays to aspects of MTD

HMRC recently announced that it would be redefining its ‘priorities’, in order to increase its resources for dealing with Brexit. Consequently, the roll out of some aspects of MTD has been delayed.

Personal Tax accounts

Personal Tax Accounts (PTAs), which are digital tax accounts for individuals (DTAs), have already been created by HMRC. PTAs have been pre-populated with existing information by HMRC and allow individuals to update their financial details, communicate with HMRC, and use real-time technology to review their tax affairs. Those wishing to register for a PTC can do so by visiting www.gov.uk/personal-tax-account.

However, further planned developments to PTAs will now not be made, with HMRC revealing that additional digital services in this area will only be developed when they ‘reduce phone or postal contact’, or otherwise deliver ‘significant savings’.

Simple Assessment

Under Simple Assessment, the government has the power to make an ‘assessment of income tax or capital gains tax (CGT) liability’ for certain taxpayers, without the individual being required to complete a self- assessment tax return. HMRC will be able to assess an individual’s tax liability on the basis of the information it holds on that person.

There are currently only two groups of taxpayers to which Simple Assessment applies and HMRC has confirmed that there will now be a ‘halted progress’ in this area.

Real-time tax code changes

In April 2017, HMRC began to use PAYE information in order to make in-year changes to tax codes in real-time. However, the Revenue has confirmed that progress in this area will be ‘halted for the time being’.

Is MTD for VAT affected?

HMRC has emphasises that MTD for VAT remains ‘on track’ to commence in April 2019. The creation of a single digital account for all business customers will now happen ‘at a slower pace’ than previously intended, but the delays will not affect the delivery of MTD for VAT.

MTD represents a fundamental change to the way in which businesses keep their records. As your accountants, rest assured that we are already working in the background to ensure our clients’ accounts are recorded and submitted to meet requirements. If you have any questions or concerns do contact us and we’ll talk you through it.

 

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This news article is for guidance only, and professional advice should be obtained before acting on any information contained herein. Neither the publishers nor the distributors can accept any liability for loss occasioned to any person as a result of action taken or refrained from in consequence of the contents of this publication.