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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. Here, 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
Following the raising of concerns over the 2018-2020 implementation timescale for the MTD for business initiative, the timetable has been altered. The changes mean that businesses with a turnover above the VAT threshold (currently £85,000) will be required to keep digital records and submit VAT returns to HMRC using MTD functional compatible software from 1st April 2019.
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. If a business’s turnover subsequently falls below the VAT registration threshold, the MTD requirement will remain. Keeping digital records and making quarterly updates will not be compulsory for taxes other than VAT before April 2020 and it’s planned that penalties for incorrect bookkeeping will not apply in the first year.
Delays to aspects of MTD
Due to changing priorities, HMRC has delayed the roll-out of some aspects of MTD:
Personal Tax Accounts
Personal Tax Accounts (PTAs) have already been created by HMRC to allow individuals to update their financial details, communicate with HMRC and use real-time technology to review their tax affairs. However, planned further developments have been cancelled.
Those wishing to register for a PTA can do so by visiting: www.gov.uk/personal-tax-account.
Simple Assessment
Under Simple Assessment, HMRC can assess income tax or capital gains tax liabilities of certain individuals based on information it holds – without a self-assessment requirement. There are currently only two groups of taxpayers to which Simple Assessment applies and HMRC has confirmed that there will now be ‘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. Progress on this has been temporary halted. MTD represents a fundamental change to the way in which businesses keep their records. As your accountants, we can keep you updated on the changing requirements.