Making Tax Digital (MTD) is HMRC’s attempt to fully computerise UK tax payers’ affairs. In effect, all the information required to work out an individual’s or a company’s tax liability will be “pushed” electronically to their personal tax account (PTA) with HMRC.
HMRC have back-tracked from their original time table which was due to commence 6 April 2018. The intention now is for all unincorporated businesses with turnover above the present VAT registration limit, £85,000, will need to file their VAT returns using a suitable online link from April 2019.
When MTD is fully implemented, certainly not before April 2020, it will no longer be necessary to submit an annual self-assessment tax return. MTD will apply to most unincorporated businesses (including property landlords). From a compliance point of view, affected businesses will need to upload summarised accounting data on a quarterly basis, and will have an opportunity to revise this data annually, confirming that all is present and correct. This is a major downside feature of MTD: instead of one annual declaration to HMRC this will be replaced by four quarterly uploads and one annual adjustment.
MTD will also require this information to be uploaded electronically. You won’t be able to fill in a form and send it in the post.
Clearly, MTD is going to be a major upheaval, for HMRC, business owners and taxpayers, and professional advisors. In fact, it will be the most significant change in the UK tax system since the introduction of self-assessment many year ago.
HMRC have indicated that affected taxpayers will be able to upload data via spreadsheets as well as from proprietary accounting software. They have also indicated that there may be free software that can be used by smaller-scale businesses.
Whether HMRC can deliver a sound platform to support MTD is largely an unknown, based on previous attempts to computerise their systems confidence is not high.
What is required is that VAT registered businesses consider their options to comply with MTD in advance of the April 2019 commencement deadline.