The government has announced that digital tax reporting for unincorporated businesses and landlords will start in April 2018, despite calls for it to be delayed.
But there will be relaxations from what had originally been planned. The government has published its responses to its consultations in 2016.
As a result of the many thousands of representation made on Making Tax Digital, the following key changes will now be implemented:
- 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)
- businesses eligible for three line accounts (with turnovers up to £83,000, but to be increased to £150,000 from April 2017 under these revised proposals) will now be able to submit a quarterly update with only three lines of data (income, expenses and profit)
- free software will be available to businesses with the most straightforward affairs
- 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
- 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, whichever is sooner
- charities (but not their trading subsidiaries) will not need to keep digital records
- for partnerships with a turnover above £10 million, Making Tax Digital for Business is deferred until 2020
The government says it will consider further issues such as the initial exemption threshold under which businesses will not have to report digitally. The currently proposed exemption is for turnovers below £10,000. However, many calls have been made for the threshold to start at the VAT registration threshold of £83,000 so that the smallest businesses are not affected.
Final decisions will be made by the government before legislation is laid later this year.
In anticipation of the new digital regime, Bishop Fleming has launched Accounting Solutions, so that clients can be up to speed with HMRC’s requirements before they become mandatory, and have at their fingertips all their financial information in real time and in a meaningful form. More information is available from our dedicated website or from your usual Bishop Fleming adviser.
You can also contact a member of our Personal Tax team or Business Tax team for further information and advice.