Making Tax Digital

MTD

The Government’s initiative Making Tax Digital (MTD) will represent significant changes to the way in which the tax system will operate. Ultimately all paper tax returns will be replaced with digital records enabling tax payers to update HMRC of their tax position in ‘real-time’. The process is currently out to consultation, with more details expected to be announced in the New Year.

At present, it is anticipated that information will need to be submitted to HMRC every quarter electronically, no later that one month after the end of the quarter. HMRC does however recognise that there will need to be an end of year report for many businesses to make adjustments and confirm that all data submitted throughout the year is accurate. This will be due nine months after the end of the accounting period.

It is expected that quarterly reporting will be phased in from April 2018. For the first year businesses will not be penalised for missed deadlines. However, after this a penalty points system will be introduced which will incur a fixed penalty. Some exemptions are proposed – for example, unincorporated businesses with a turnover of below £10,000 will not be required to adopt digital reporting. Exemptions will also be made for those in a remote location where access to the internet or poor broadband speed makes it impossible to file records electronically.

The exact details and timings of HMRC’s plans are subject to confirmation and we will update all our clients when more information becomes available.