Making Tax Digital – It was announced in the recent Spring Budget that, following concerns from tax professionals and taxpayers alike on the tight implementation timeframe, the government will delay the introduction of quarterly reporting for unincorporated businesses and landlords with turnover below the VAT threshold (£85,000) until April 2019.
In addition, the cash basis entry threshold will be increased to £150,000 and exit threshold to £300,000, and will extend the use of the cash basis to unincorporated landlords. The government will also seek to simplify the rules on capital and revenue expenditure within the cash basis, to make it easier for businesses to work out whether their expenditure is deductible for tax.
Quarterly reporting under Making Tax Digital will apply to the following businesses at these times:
April 2018 – Sole traders, landlords and partnerships with turnover in excess of the VAT threshold
April 2019 – Sole traders, landlords and partnerships with turnover in excess of £10,000 but less than the VAT threshold
April 2020 – All companies
In a nutshell, here are the key features of Making Tax Digital
- Income and expenses will be reported quarterly
- The timing of the submissions is linked to the business’ own accounting year, NOT the HMRC tax year
- There is no tax to pay at the time of submitting the quarterly report (although taxpayers can chose to pay early if they wish to)
- There is no free HMRC software but we hope to learn of approved software in due course
- The final reconciliation statement is at the end of the business’ accounting year
Making Tax Digital represents significant changes in the way UK businesses report to HMRC and we are here to help you get it right. Please contact Helen Sewell on 01527 558539 or [email protected] if you have any queries on the new rules.