Last year HM Revenue and Customs released 6 consultation documents relating to the plans for Making Tax Digital.
They have now announced their response to the consultations.
Making Tax Digital will proceed along the proposed timeline, i.e. it will come in from April 2018 for Landlords and the Self Employed
Apparently, businesses will be able to continue to use spreadsheets to record receipts and expenditure, but they must link them to software to automatically generate and send the updates to HMRC. So you will still need the software, whatever form that takes.
The initial threshold, which in the consultation documents was set at £10,000 has not been set, and will not be set until sometime later this year; this means there is still great uncertainty for the smaller businesses over whether they will be part of the “Digital Revolution”.
The Cash Basis, a simplified way of recording your transactions, will be available to businesses with turnover up to £150,000, an increase from the current £83,000 threshold.
The first MTD-capable software is supposed to be available by April this year, that is only two months away! The Revenue have announced that Free software will be available to the majority of the smallest businesses, the question is what capability will it have – I suspect it will only be for the simple Cash Basis.
After April 2018, there will be a 12 month “soft landing” period before penalties are applied.
Businesses that cannot go digital will not be required to do so – however, who decides whether a business cannot go digital?
So, we now know that Making Tax Digital is going to happen from April next year. Although we still don’t know at what threshold this will apply, you need to start thinking about the changes you need to put in place – principally procedures to produce figures on a quarterly basis. Decisions on Software will have to wait until the MTD-capable software is released.
Contact me to make an appointment to discuss what this might mean for you.