You may not be able to plan for Brexit but you must have a plan for MTD
Making Tax Digital (“MTD”) is more than just another set of initials for all small businesses and tax payers to get to know. MTD represents a highly significant change in how we will all be recording and returning VAT, income tax and corporation tax information to HMRC. And it starts three days after Brexit.
From 1 April 2019, all VAT registered businesses which turnover over £85,000 – sole traders, partnerships, limited companies, trusts and charities – will be required to maintain digital accounting records. For these businesses maintaining paper records will cease to meet the legal requirements in tax legislation from that date.
These businesses must use a “functional compatible software product” which links to HMRC’s software platform to submit information to HMRC. The current HMRC online VAT return services will be withdrawn for those within the scope of the MTD rules.
The software requirements include:
- maintaining digital records of each individual transaction;
- ensuring those digital records are securely stored and maintained;
- producing a quarterly update to link to HMRC; and
- providing an end of period statement where applicable
Businesses do not have to scan and store invoices and receipts digitally however the digital records must be kept which include for each transaction:
- the amount of the transaction;
- the date of the transaction; and
- the cost heading into which the transaction falls
Almost all businesses meeting the turnover criteria will come within MTD as there are very limited exceptions (available only to religious societies whose beliefs are incompatible with the requirements of MTD, to the digitally excluded or to those subject to an insolvency procedure).
And MTD for VAT is only the first stage in digital tax recording.
From April 2020, the Treasury currently propose introducing MTD for income tax and corporation tax. Details have yet to be provided however MTD is likely to be applied to all sources of income from self-employment and property income and HMRC have suggested only those with a turnover below £10,000 would be exempt from MTD.
So whilst the politicians work out how to implement Brexit, small businesses and all taxpayers will need to be working out how to implement MTD.
If you would like to know more about MTD or require help implementing MTD for your business, please contact Stephen Chan at Stephen.email@example.com