HMRC digital accounts and quarterly reporting (MTD) – where we are now following 2017 budget
As you are now doubt aware, HMRC are introducing digital record keeping and making of quarterly returns. This will mean that most self-employed people and landlords will need to keep track of their tax affairs digitally and update HMRC quarterly – making the annual tax return a thing of the past for a lot of people and businesses. It is thought that the new system will reduce the number of avoidable errors and reduce the cost, uncertainty and worry that businesses face should HMRC look into their affairs. After an extensive consultation period – between HMRC and businesses and agents. HMRC listened to concerns, as a result:
Businesses will be able to continue to use spreadsheets for record keeping but need to ensure they meet the requirements of MTD by filing quarterly through software;
Businesses with turnover less than the VAT threshold, now £85,000 for 2017-18, that can submit three line accounts on their tax returns – will be able to submit quarterly updates on the same basis – three lines of data (income, expenses and profit);
Free software will be available to businesses with the most straight forward of affairs;
Digital recording does not mean that invoices need to be stored or raised digitally;
End of year must be concluded by the earlier of 31 January following or 10 months after the period end; and
Charities will not need to keep digital records.
There is exemption for businesses and landlords with total turnover of less than £10,000. It was to be brought in as follows:
Self-employed and landlords from April 2018; and
Companies from April 2020.
This has now been amended to:
Self-employed and landlords with total turnover > the VAT threshold – April 2018;
Self-employed and landlords with turnover < the VAT threshold – April 2019;
Partnerships with turnover > £10m – April 2020; and
Companies from April 2020
HMRC have issued an updated impact assessment. They feel there will be a one off cost of £280 per business, followed by small on-going annual savings. This is at odds with the thoughts of businesses and agents – also there is the time aspect of the businesses to consider. So what does this mean for you?
For those of you that use accounting software it is likely that the software provider will provide an option to provide the information to HMRC digitally;
For those of you who are landlords or self-employed, with total turnover less than the VAT threshold you will not need to now do anything until April 2019 – however it is still worth giving it some thought earlier;
Excel spread sheets can now still be used;
We are yet to see what free software is to be provided for the quarterly reporting. For those of you that are cost conscious I suggest you wait and see what is provided.
Debbie Wicks Friston Wicks Chartered Accountant and Chartered Tax Adviser