Making Tax Digital (MTD) – Proposed plans from 2018!

Making Tax Digital (MTD) is the government’s plan to transform the way the tax system works. The plan is to move, by April 2020, to a fully digital tax system where:-

• Bureaucratic form-filling is eradicated and taxpayers will not require to provide HM Revenue & Customs (HMRC) with information it already holds, such as details of employment or pension income or bank interest received
• There will be a real time system to calculate tax liabilities/repayments so that large under or overpayments of tax do not build up
• Over the course of time, this will mean the end of the Tax Return for millions
• Taxpayers will have access to digital accounts to give them an overview of their up to date tax positions for ALL taxes and entitlements in the one place
• HMRC will interact digitally with their “customers”

HMRC have stated that Making Tax Digital will make it easier for individuals and businesses to get their tax right and keep their tax affairs up to date. Making Tax Digital is being introduced as HMRC believe that £8bn of tax is underpaid each year, due to carelessness or errors in Tax Returns.

Income tax information (except for partnerships with turnover of more than £10m) will require to be reported DIGITALLY to HMRC with effect from April 2018, Vat information from April 2019 and Corporation Tax and Partnerships with turnover of over £10m information from April 2020.

There have been many calls to delay the introduction of MTD including from the Treasury Committee who suggested that the initiative is being rushed through before the necessary systems are ready. Our own institute, The Institute of Chartered Accountants of Scotland, also has significant reservations about the timescale and approach.

There have been various consultation papers issued by HMRC and we have participated in joint meetings with them regarding the proposals to give our feedback, including requesting a delay in the introduction of MTD. HMRC have recently responded to the comments on MTD and have confirmed that they have no plans to change to the dates for the phased introduction detailed above.

They have been some concessions in that spreadsheets can continue to be used for digital record keeping purposes but these will have to be linked to compatible software to transmit the information quarterly to HMRC.

These changes will impact on:-

• Self-employed individuals and buy to let landlords with gross income of over £10,000
• Partnerships
• Companies
• Charities with trading subsidiaries

HMRC are introducing a voluntary pay as you go system as part of MTD. At present there are no plans for accelerated tax payments but that will surely follow as HMRC strives to reduce the tax gap.

We will be contacting our clients who are affected by MTD to ensure that their records will comply with the new digital regime and that they are aware of the new digital reporting requirements and deadlines.

We will be introducing new software to assist to streamline the process and make it as simple as possible and ensure that we can make the necessary quarterly reports to HMRC for our clients who would like our assistance with this.

Please contact us here  if you have any concerns or would like to find out more about MTD and you will be put through to a member of our team. If you would like to read more about the software packages that we use and recommend, that will be MTD compliant, please click on the following link or get in touch.

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