HMRC is going all digital....
As you may have heard over the last few months the government has now resumed the process and its progress towards the launch of MTD which had been postponed due to the general election. I wanted to take a few moments to explain to you what we know so far and how it may impact on you and your business.
What is MTD?
Making tax digital is the governments attempt at streamlining the tax return system and taking it into the 21st century. It will mean more regular tax assessment returns and the removal of the traditional paper form that is currently used by some. There will be exceptions such as businesses located where the internet is not available or where religion prevents use of IT equipment, more exceptions are to be announced in the near future.
What do you mean Digital?
Basically the government and HMRC want to move away from manually inputting details to the HMRC website and paper forms. They want you to use software (API) that talks to HMRC's website directly.
What about my paper ledgers and excel ledgers?
There will be a potential to submit the overall numbers into a small peace of software allowing for these bookkeeping methods to be continued but this is not guaranteed and HMRC recommends everyone stores the data in the cloud using software such as QuickBooks, Xero, FreeAgent etc.
Will this cost me more?
HMRC will provide a free software option that you can enter your data into and then transmit to HMRC, however it will have limited functionality compared to paid for software such as QuickBooks, Xero and FreeAgent. We don't know what the free software looks like yet and how it will work. In regards to potential increased accountancy and bookkeeping fees JGBC has no plans to increase its fees based on MTD but can't guarantee that other practises won't take advantage of this scheme to increase profits.
The tax returns will be done quarterly this is no different for the majority of VAT registered businesses but will increase the number of times you do a Self assessment tax return (SATR).
When will MTD start?
MTD will role out in phases some dates and phases are still being decided but what we know so far is....
- April 2019 - Businesses (Ltd & PLC) that exceed the annual VAT threshold or are VAT registered voluntarily will be incorporated into the scheme .
- April 2020 - Businesses (LTD & PLC) that are below the VAT threshold limit will be incorporated into the scheme.
- April 2021 all sole traders, partnerships & Self Assessment Tax Return applicable people will be incorporated into the scheme.
What do i need to do next?
Nothing, JGBC was aware of MTD and its objectives and is working to ensure clients see minimal change in day to day process for this. All of JGBC's clients are "MTD Ready" the only impact that you will see is the frequency change of tax returns. Because the returns for SATR will be smaller but more frequent and the efficiency of cloud technology JGBC has no plans of increasing rates in relation o MTD.
I hope the information in the email is useful and answers some questions. As more information is released JGBC will update you. As always if you have questions please feel free to get in touch.