Making Tax Digital… The Deadline Is Coming.
The Making Tax Digital deadline is fast approaching, with the crossover set to be the biggest change to the administration of the tax system for many years. For many businesses, the change provides confusing and expensive action. Whilst April 2019 sees the soft implementation of the VAT aspects, where those earning over the threshold must begin to adhere to the regulations. It is highly suggested to begin following the digital methods as soon as possible, so that any issues can be sorted before it becomes a fineable offense. We want to take this opportunity to break down some of the key aspects that businesses need to be considering prior to the Making Tax Digital deadline…
VAT Registered: Businesses with a turnover of £85,000 and above will need to be ready to go digital by April 2019; whether you submit monthly or quarterly. Whilst businesses with a turnover lower than this threshold have extra time, as previously suggested, early adoption is advised. The current online VAT return will not meet the requirements.
Income Tax: (self-employed, partnerships, trusts and landlords who complete self-assessment tax returns) MTD is expected to become mandatory for income tax reporting, but not before 2020. Pilots of MTD for income tax started on a small scale in April 2017 and will be rolled out to all businesses who wish to participate in the coming months.
Corporation Tax (limited companies): The timings for MTD for corporation tax have yet to be confirmed but it will not become mandatory before April 2020.
There are exemptions for those who are not able to engage digitally for religious reasons or due to a factor such as age, disability or location (eg, no availability of broadband). These exemptions are the same as the current exemptions for VAT online filing.
VAT registered businesses with a turnover of less than the VAT threshold (ie, businesses who have registered voluntarily) will initially be exempt from MTD VAT reporting but this exemption may be removed from 2020 or later.
When MTD for income tax becomes mandatory there will be an exemption for businesses and landlords with a very small turnover; the level of this exemption has not been set.
Stay In The Know
Being prepared for delays and issues will be key, staying up to date with the latest HMRC updates will help you to stay on track and be aware of any difficulties that you may encounter throughout the process.