Tuesday, July 17, 2018

Get ready for Making Tax Digital

June 29, 2018 by  
Filed under News & Business

Expert view: Farm businesses and the self-employed must prepare for the upcoming digital revolution of tax, says Lucinda Davenport.

A year has passed since the government announced its Making Tax Digital initiative in July 2017, with the aim of modernising and creating a more efficient tax system for UK businesses, the self-employed, and landlords.

Making Tax Digital will come into force for VAT in April 2019, and will be extended to income tax in 2020. So it is key for self-employed individuals, landlords and business owners – with gross turnover and/or rents over £10,000 – to know exactly what it means for them.

What will it involve?

Records will have to be kept digitally and taxpayers will have to send quarterly updates with summaries of income and expenditure to HMRC. The requirement will be to submit the update within one month after the quarter end.

Year-end finalisation of trading results will be required by either 10 months after the end of the accounting period, or January 31 following the year of charge of the profits – whichever comes first.

Making Tax Digital will benefit businesses in a variety of ways:

• Individuals will no longer have to give HMRC information that it already has or can easily get from employers, banks, other government departments.

• Information held by HMRC will be easily accessible for individuals to check that their details are complete and correct.

• HMRC will collect and process tax information in near real time, with no need for individuals to wait until the end of the tax year to find out how much they must pay.

• Individuals – will be able to interact with HMRC digitally and at a time to suit them. By 2020,  people will have their own digital account, just like online banking.

Digital record-keeping means either using specially approved accounting software or – spreadsheets in conjunction with other software – to allow a flow of data between farm businesses and the HMRC.

Transactions will need to be analysed in accordance with the categories on the current self-assessment return. Businesses will not be required to keep digital copies of their receipts – it is the transactions that need to be stored digitally.

Key dates

For  businesses with turnover that exceeds the VAT threshold, obligations for VAT start with effect from the first VAT return period, beginning next April.

Lucinda Davenport is an agricultural specialist at Crowthers Chartered Accountants. For details, visit www.crowther.co.uk.

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