Making Tax Digital in 10: All you need to know

Man using tablet
Philip McNeil By Philip McNeill, ICAS

27 March 2017

How the biggest change in tax for twenty years will impact your practice and business:

How the biggest change in tax for twenty years will impact your practice and business:

  1. 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.
  2. One month will be allowed to make each quarterly update; for smallest business, this is a three-line account: updates made directly from the accounting software to a digital tax account.
  3. 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.
  4. Digital records mean ‘intelligent’ digital accounting software; with the potential for scanned invoices; smart phone apps; may be stand-alone or cloud. Spreadsheets permitted if linked to MTD submission software.
  5. Push towards cash accounting for SME businesses, with the cash accounting threshold at £150,000 entry and £300,000 exit levels. New cash accounting for unincorporated property business. New rules for capital/revenue divide.
  6. Agent access will be through practice software: so, make sure you know what your software supplier is providing and when.
  7. 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.
  8. Timeline: unincorporated landlords and the self-employed with turnover above the VAT threshold start in April 2018; VAT moves onto the new system April 2019 as do unincorporated businesses and landlords with turnover between £10,000 and the VAT threshold; companies by 2020.
  9. Voluntary pay as you go option – based on forecast tax liability in digital tax account.
  10. New points based penalty system for all late returns across Income Tax, VAT and Corporation Tax.

ICAS commentary and other resources

HMRC consultations

ICAS responses

Individual consultations

  1. Bringing business tax into the digital age
  2. Simplifying tax for unincorporated businesses
  3. Simplified cash basis for unincorporated property businesses
  4. Voluntary pay as you go
  5. Tax Administration
  6. Transforming the tax system through the better use of information


  • Tax

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