Having first been announced back in 2015, Making Tax Digital is a government initiative that will transform the current tax system and bring an end to the year-end tax return. Following a lengthy consultation period, HMRC published the long-awaited policy statement at the end of January.
So, what have we found out? Well despite the ongoing criticism over the proposed timescales, HMRC have confirmed that there will be no delay, which means that quarterly digital reporting will be phased in from April 2018.
Self-employed individuals and landlords will be the first to move over to digital tax with SMEs to follow shortly after.
By 2020, most businesses, self-employed individuals and landlords will have to update HMRC quarterly and manage their tax affairs digitally.
And what else did we learn in the policy statement? The following are some key highlights or changes that have been outlined:
- HMRC will pilot the initiative before officially rolling out in April 2018
- Self-employed individuals and landlords with a turnover of under £10,000 a year will not be required to keep digital tax records but can opt-in
- Partnerships with a turnover of £10m or more will not be required to move over until 2020
- There will be a 12-month period for businesses and individuals to become familiar with the new initiative before late submission penalties apply
- Charities are exempt from the initiative
- Businesses can continue to use spreadsheets but they will need to be linked to some kind of software to send updates to HMRC
The above could, however, be subject to further changes as the initiative begins to be piloted on thousands of businesses.
It is still a daunting prospect for a huge number of businesses who still the benefits of digital tax as minor compensation for that seems to be an increased reporting burden. However, our view remains that businesses should be eager to have up to date, reliable information on their finances to hand so that they can make informed business decisions.
Businesses are being provided with the opportunity to get control of their finances, to simplify and modernise their systems and give them valuable information at the right time. Why wait until HMRC enforce it? Speak to us today and find out how we can help you improve your business and get you up to speed with digital tax!