Making Tax Digital in 10: All you need to know
How the biggest change in tax for twenty years will impact your practice and business:
- Brings in mandatory digital records for business and landlords, with quarterly tax submissions to HMRC. New businesses will have to make a first return within four months of start-up.
- One month will be allowed to make each quarterly update; for smallest business this may be just a three-line account: but it will have to made directly from the accounting software via a digital tax account.
- Nine months permitted for year-end finalisation – the ‘quarter five’. In the consultations, HMRC envisages taxpayers submitting their own quarterly updates and agents making the final year-end update – the fifth return.
- Digital records most likely mean ‘intelligent’ digital accounting software; with the potential for scanned invoices; smart phone apps; may be stand-alone or cloud.
- Push towards cash accounting for SME businesses, with the cash accounting threshold potentially doubled (which could bring an exit level at four times the VAT threshold).
- New cash accounting for landlords – for unincorporated property business: with no turnover limit. New rules for capital/revenue divide, interest restrictions and no sideways loss relief.
- Third party income data from banks, employers, and potentially DWP, sucked into digital tax accounts: discrepancies would need to be challenged with the third party.
- Timeline: unincorporated landlords and the self-employed with £10,000 or more gross income – start in April 2018; VAT moves onto the new system April 2019; companies by 2020. Possible 12 month deferral for some SME businesses (threshold to be agreed).
- Voluntary pay as you go option – based on forecast tax liability in digital tax account.
- New points based penalty system for all late returns across Income Tax, VAT and Corporation Tax.
ICAS commentary and other resources
- Making Tax Digital: Compliance and administration
- Making Tax Digital: Interfacing with HMRC in real time - all the time
- Making Tax Digital: Why did the Titanic sink?
- Making Tax Digital: Pay as you go
- Making Tax Digital: Cash accounting for landlords - do you need an accountant?
- Making Tax Digital: Cash accounting
- Making Yax Digital: How will it impact your practice?
- Making Tax Digital: Fact or fiction?
- Making Tax Digital: Complications and risks
- Making Tax Digital: A business burden too far?
- HMRC launches Making Tax Digital consultation
- Making Tax Digital: The view from ICAS
- Crofter meets HMRC four times a year in new digital tax world
- Bringing business tax into the digital age
- Simplifying tax for unincorporated businesses
- Simplified cash basis for unincorporated property businesses
- Voluntary pay as you go
- Tax Administration
- Transforming the tax system through the better use of information