Making Tax Digital: Update

The House of Lords' Economic Affairs Committee is the latest organisation to call on the Government to delay the implementation of its Making Tax Digital plans, claiming not enough consideration has been given to support those lacking digital skills. However, despite the Budget announcement of a one-year deferral for unincorporated businesses and landlords with turnovers below the VAT threshold, the Government appear determined to press ahead with its plans for digital quarterly reporting by 2018.

What we know

By 2020, most businesses, self-employed people and landlords will be required to provide updates on their financial affairs at least quarterly via their online digital tax accounts although HMRC have been keen to emphasise that this does not mean completing a full tax return four times a year. Currently, those with a turnover below £10,000 will not have quarterly digital reporting requirements.

Unless further changes are announced ahead of the implementation date, the timetable for the start of quarterly reporting is as follows:

July 2018

First quarterly report for businesses, self-employed people and landlords with profits chargeable to Income Tax and Class 4 National Insurance contributions and a turnover above the VAT threshold (£83,000 for 2017/18)  

2019 

First quarterly report for businesses, self-employed people and landlords with profits chargeable to Income Tax and Class 4 National Insurance contributions and a turnover below the VAT threshold but above the £10,000 

2020

First quarterly report for corporation tax

What we don’t know

There are many details still to be announced about how Making Tax Digital will work and HMRC have been criticised for not giving taxpayers adequate time to prepare.

One of the key considerations is what software will be required to digitally update HMRC. Many businesses do not know whether their existing software will compliant or what the alternatives are. HMRC have said that basic products will be made available for businesses with straightforward affairs but have not yet indicated when or what the costs will be.

Please contact James Chappell if you have any concerns about the implementation of Making Tax Digital.