Clues as to how MTD will work for Income Tax
Published: 06/09/2018 By Robert CoyleMaking Tax Digital is coming – as we’ve written before this will be a fundamental reform of how the government administers the UK tax system.
MTD starts in April next year for VAT registered businesses – with the aim that other taxes (income/corporation tax, inheritance etc) get added in some unspecified order at a future date.
Sadly the government has so far been very vague as to what MTD will mean in practice but clues are emerging – the latest being a 4 June update buried on the UK Government website
THIS MAKES CLEAR THE SCALE OF CHANGE COMING
According to the government website you will need to:
- Use one of a number of software options to keep your business records
- Use this software to keep records of income & expenses & in particular ensure that your software can send updates to HMRC
- EVERY THREE MONTHS –send a summary of income & expense to HMRC
- Send a final report of income & expenses at the end of your accounting year – at this point you will claim allowances & reliefs
The government talk about the option of paying your tax bill as you go – we wonder why this will be an option? If you are going to have to give quarterly estimates of profits, surely it will be a very short step to the government demanding quarterly payments on account (but that’s just our opinion).
The key point is that this will be a huge amount more reporting required more quickly.
We will be issuing further updates on our approach to handling this requirement. We have designed a solution & we are currently deep in systems testing. Keep an eye out for our further updates.