MTD is HMRC’s project to streamline information received to enable it to have up-to-date, accurate information in relation to taxpayers’ affairs whether they be individuals, partnerships or corporates.
On a quarterly basis information currently inputted into an annual tax return will be required to be uploaded to the HMRC MTD system and tax paid accordingly. An “end-of-period statement” will be submitted on an annual basis presenting the taxpayer’s final position.
There had been concerns that HMRC would not allow the continued use of spreadsheets, but they have now conceded that businesses will be able to continue to use spreadsheets for record keeping but they must keep to HMRC requirements. It may be necessary to combine the spreadsheets with other software to clean the data.
Reporting is set to start in April 2018 with an estimated five million businesses being affected by the new reporting requirements. A year-long testing period will start this April, with software developers and HMRC expected to work closely to ensure that appropriate software for quarterly reporting is available to trial by a wide range of taxpayers.
Taxpayers subject to Income Tax will be required to start using MTD in April 2018 unless their annual turnover is less than £10,000. Large partnerships with turnover in excess of £10 million will be able to defer their date of compliance to April 2020 in line with corporate taxpayers. MTD will be required for VAT reporting from April 2019. Taxpayers subject to Corporation Tax will be required to start using MTD in April 2020 unless their turnover is less than £10,000. No upper limit for Corporation Tax has been released yet.
By 2020, all individuals and businesses will be able to see a comprehensive picture of their tax liabilities and entitlements in one digital account. Instead of introducing the new system to all taxes at the same time, HMRC will make these changes gradually.
There are currently further consultations out for discussion. Final updates will be made to MTD before the legislation is put through parliament later this year.
We are already talking to the software providers we use for our bookkeeping and tax compliance services, and we have a solution to deliver a seamless, pain-free service to our clients in the MTD world.
Should you wish to discuss the introduction of MTD and how it will affect you/your business, please do not hesitate to contact our team.