Making Tax Digital For Business - Update
Extensive changes to how taxpayers record and report income to HMRC are being introduced under a project entitled Making Tax Digital for Business (MTDfB).
MTDfB is to be introduced in stages and the government has confirmed in the Budget the deferral of some of the obligations for one year. The result of this announcement is that unincorporated businesses and unincorporated landlords with annual turnover:
- above the VAT threshold (currently ¬£85,000) will need to comply with the requirements of MTDfB from the start of accounting periods which begin after 5 April 2018
- at or below the VAT threshold but above ¬£10,000 will need to comply from the start of accounting periods which begin after 5 April 2019.
Companies (and partnerships with a turnover above ¬£10 million) will not come within MTDfB until April 2020.
The government has decided how the general principles of MTDfB will operate. Draft legislation has been issued on some aspects and more is contained in Finance Bill 2017.
Under MTDfB, businesses, self-employed people and landlords will be required to:
- maintain their records digitally, through software or apps
- report summary information to HMRC quarterly through their 'digital tax accounts' (DTAs)
- make an 'End of Year' declaration through their DTAs. The End of Year declaration will be similar to the online submission of a self assessment tax return but may be required to be submitted earlier than a tax return. Businesses will have 10 months from the end of their period of account (or 31 January following the tax year - the due date for a self assessment tax return - if sooner)
DTAs are like online bank accounts - secure areas where a business can see all of its tax details in one place and interact with HMRC digitally.
Businesses, self-employed people and landlords with turnovers under ¬£10,000 are exempt from these requirements.
Internet link:¬† GOV.UK MTDfB¬†