HMRC digital accounts and quarterly reporting (MTD) – update February 2017

HMRC digital accounts and quarterly reporting (MTD) – update February 2017
20th February 2017 Debbie

Following on from my article last month in relation to the above. My earlier articles – February, May, November 2016 and January 2017 – can be found in my earlier blogs.

The Government published, on 31 January, their outcome of the consultation on bringing business tax into the digital age – digital record keeping and making of quarterly returns to HMRC for most self-employed persons, landlords and businesses.

Most self-employed people and landlords will need to keep track of their tax affairs digitally and update HMRC quarterly from 2018 – 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.

There was 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 requirement of MTD;
  • Businesses with turnover less than the VAT threshold, currently £83,000, 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;
  • Charities will not need to keep digital records; and
  • For partnerships with turnover > £10m MTD is deferred to 2020.

The government are to consider further issues – initial exemption threshold (currently turnover of <£10,000) and deferral of changes for some small businesses – a decision will be made later this year.

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 thoughts of businesses and agents – also there is the time aspect of the businesses to consider.

It was proposed that current rules for interest on Income tax and class 4 NIC will still apply with possible alignment across all tax regimes, with more work to be done on late submission penalties.

It was agreed to increase the entry threshold for the Cash Basis of accounting to turnover < £150,000 for unincorporated businesses, including landlords.

Taking on board the Treasury Select Committees comments, HMRC will begin a pilot of MTD from the April 2017 before rolling out to all landlords and businesses.

So it appears there are further things to be decided, but progress is being made.


Debbie Wicks

Friston Wicks Chartered Accountant and Chartered Tax Adviser