Latest News on Making Tax Digital

The Making Tax Digital Saga continues, with still no direct evidence that the government will be ready to enforce the changes by 2020 as proposed.

More Legislation Published in October

In the last few weeks, HMRC has published draft secondary and tertiary legislation and guidance in respect of Making Tax Digital for business. These relate to Income Tax and VAT and have been published together with draft guidance on MTD for VAT. Comments on these publications are invited by 10th Nov 2017.

HMRC Get to Make Up the Rules

The primary legislation on Making Tax Digital was published on 8 September 2017. It pretty much includes provision for HMRC to make up the rules as they go along, by the use of secondary legislation.

It seems the intention is to finalise the new regulations by April 2018 in order that businesses will be prepared for Making Tax Digital for VAT in 2019, and Income Tax in 2020.

The draft Income Tax (Digital Requirement) Regulations will apply to income tax. The draft Income and Corporation Taxes (Electronic Communications) (Amendment) Regulations cover electronic delivery of returns.

VAT Draft Guidance

HMRC has published draft guidance for VAT, VAT legislation overview. Businesses with a turnover above the VAT threshold, currently £85,000, will have to keep their records digitally (for VAT purposes only), and provide their VAT return information to HM Revenue and Customs (HMRC) through Making Tax Digital functional compatible software. Making Tax Digital will be available on a voluntary basis to other businesses, for both VAT and Income Tax from April 2019.

Small business reporting under Making Tax Digital

Small trading businesses in the Stockport area will be pleased to see that HMRC have allowed a reduced reporting requirement for income tax payers.

This means that trades and professions, once within Making Tax Digital, with turnover below the current VAT registration threshold can choose to provide a reduced number of categories as part of their quarterly update.

These include:

Income

  • Turnover – takings, fees, sales or money earned
  • Other business income Expenses
  • Total allowable expenses

Business that fall into these categories will still be required to provide full details of their income and expenses when they file their end of period statement.

It is not proposed that the reduced reporting requirement will apply to landlords, partnerships or businesses trading above the VAT threshold.

What’s the expected outcome?

At the moment, we can assume that Making Tax Digital is coming in as planned, but the Autumn Budget in November may furnish us with more information.

A number of commentators have highlighted the danger of using secondary legislation by this government. The fears are not unfounded, as secondary legislation is not subject to the same parliamentary scrutiny as the primary legislation.

The additional problem of secondary legislation is that it is very hard to track and this is a problem all too frequently encountered by the tax tribunals.

Our advice is to move to a cloud based accounting system as soon as possible, and if you have any queries or questions about Making Tax Digital to get in touch with us.

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