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We live in an increasingly digital world, with online shopping, banking, games and social media. Under MTD, HMRC propose to transform the UK tax system into one of the best digital tax services in the world resulting in the 'death of the annual tax return'.
What is proposed?
With certain limited exceptions (see below) all businesses and landlords will be compelled to:
By 2020 each taxpayer will have their own digital tax account (DTA) which HMRC will pre-populate with third party data (such as bank interest and salary). Taxpayers will be able to access their DTA to get a real-time picture of all of their tax affairs (including, for example income tax, NIC and VAT).
When will MTD start and who will be exempt?
Although businesses will need to submit quarterly updates, they will be able to choose whether or not these updates include either accounting adjustments (for items such as accruals, prepayments and stock) or tax adjustments. Some taxpayers may choose to make such adjustments only once a year when the final end of year ‘return’ is submitted. Avoiding making such quarterly adjustments should reduce the cost of complying with MTD but will also reduce the accuracy of tax forecasts in the DTA.
What does it mean for me?
The scale of the reforms is huge and likely to require the biggest adjustment by smaller businesses and landlords.
The fact that HMRC recently suffered an internet blackout during one of their agent strategy meetings, which included a talk on MTD from their own office in London, does not bode well!
Many professional bodies and businesses have expressed considerable concerns regarding the additional compliance obligations and costs MTD entails and it is hoped that HMRC will take these on board and moderate their proposals.
How can we help you?
We will be monitoring MTD as HMRC refine their proposals and using our considerable expertise in online and offline accounting software packages to advise our clients of the different options available and how we can assist them in complying with MTD and improve the quality of the management information digital records can provide.
Please keep an eye on our website for further updates but if, in the meantime, you need any further information on MTD please contact Jimmy Hair at firstname.lastname@example.org.