Who will this affect?
Under the proposals, all businesses and landlords will be affected by the new rules unless they are exempt. The March Budget indicated that the level of gross turnover and/or gross rents for which exemption is to be provided is £10,000. There will also be exemptions for Charities, Community Amateur Sports Clubs and those unable to use digital systems due to religious beliefs or medical conditions.
When will this impact?
This is the big question! Prior to the recent general election announcement there was a timetable in place which was expected to become law in the next few months. The MTD provisions have been dropped from the recent Finance Bill, to allow the Bill to be passed in the short timeframe available before the dissolution of parliament but this came with the caveat of some interesting comments. When the Bill was read in the House of Commons it was indicated ‘the government will legislate....at the earliest opportunity, at the start of the new parliament’ and ‘ the government remain committed to the digital future of the tax system, a principle widely accepted on both sides of the house’. These comments will for many encourage prudence in planning ahead for the continued introduction of MTD.
Under the original proposals, unincorporated businesses and landlords would be brought within the MTD rules from the start of the first accounting period after 5 April 2018 if their total gross income exceeds the VAT threshold (currently £85,000). The entry point for many may only be one year away!
Unincorporated businesses and landlords with turnover below the VAT threshold but more than £10,000 will join a year later, from the start of the first accounting period after 5 April 2019.
VAT registered businesses will be required to bring their VAT returns within the MTD process from April 2019. This suggests that the web-based VAT return process will be withdrawn from 2019.
Limited Companies will not come into MTD until April 2020.
How can you make sure you meet the MTD requirements?
In order to meet MTD requirements you must keep digital records. This will mean either using MTD approved accounting software or spreadsheets accompanied by software which together will meet the requirements of MTD. HMRC expects businesses to keep their records as near to real time as possible.
Businesses and landlords must analyse their transactions in accordance with the categories currently shown within the self assessment tax return.
You must make submissions showing totals of transactions to HMRC at least once every three months.
You must make a final submission to finalise profits for the accounting period. This will be made the earlier of 10 months after the end of the accounting period or 31 January following the year of charge for the profits.
As your advisers we can offer guidance on what software product will suit your business to minimise the administration burden and cost of MTD compliance. We have in our team accredited software advisers for Sage, Xero, Kashflow and Quickbooks Online.
It is to be hoped that greater clarity for the implementation timetable for MTD follows shortly after the election and we will continue to advise as the MTD ‘story’ develops.
Kirsty MacDonald CTA FCCA | firstname.lastname@example.org
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