Making Tax Digital

Unless you have been hiding under a rock (which might feel like a good idea some days!), you will be fully aware that as a self-employed person you will be required to submit quarterly digital returns of your trading income and profits by 2020. On 31 January 2017, the Government published its response to six ICAEW consultation documents on Making Tax Digital (MTD). It is notable that some key issues are still under consideration. In particular, the initial exemption threshold and the possibility of deferring the changes for some small businesses has yet to be announced. The government is taking more time to consider these issues alongside the fiscal impacts, and final decisions will be made before legislation is laid later this year. The headlines in the overview document are as follows: <ul> <li>businesses will now be able to continue to use spreadsheets for record keeping, but they must ensure that their spreadsheet meets the necessary requirements of Making Tax Digital for Business - this is likely to involve combining the spreadsheet with software (The importance of retaining the ability to keep records in this way was requested by a wide range of stakeholders, particularly small businesses)</li> </ul> <ul> <li>businesses eligible for three line accounts will now be able to submit a quarterly update with only three lines of data (income, expenses and profit)</li> </ul> <ul> <li>free software will be available to businesses with the most straightforward affairs</li> </ul> <ul> <li>the requirement to keep digital records does not mean that businesses have to make and store invoices and receipts digitally, something they were particularly concerned about</li> </ul> <ul> <li>activity at the end of the year must now be concluded and sent either by ten months after the last day of the period of account or 31 January following the tax year, whichever is sooner. This in essence, will speed up the filing of those self-employed people with, for example, with a 30 April year end.</li> </ul> <ul> <li>charities (but not their trading subsidiaries) will not need to keep digital records</li> </ul> <ul> <li>for partnerships with a turnover above £10 million, Making Tax Digital for Business is deferred until 2020. </li> </ul> HMRC will begin piloting digital record keeping and quarterly updates for a full year from April 2017 with some businesses, but the nature of these pilots is not yet known. There is still a lot to think about to bring this to life, and Team CB fully supports the move to MTD, which is essential to ensuring that the UK continues to lead the way and create an environment for small businesses to flourish and enjoy success.