The essential elements for businesses and landlords are:
- Paper records will no longer be sufficient: It will become mandatory for almost all businesses and landlords (self-employed, partnerships and limited companies) to use software or a spreadsheet to keep accounting records. Paper accounting records will cease to meet the requirements of tax law.
- Quarterly reporting: There will be a requirement to submit updates to HMRC each quarter directly from accounting software, within one month of the end of each quarter.
As your accountants we will support you through these changes and provide the ongoing services that you need. However, the changes are so fundamental that it will be necessary to review record keeping systems and possibly implement changes to ensure you are compliant.
When does it start?
Your start date for MTD depends on the size and structure of your business and your accounting year end. We will discuss your specific start date with you, but in general:
Income Tax (self-employed, partnerships, trusts and landlords who compete self assessment tax returns):
- MTD will become mandatory from April 2018 for businesses and landlords with gross income over the VAT threshold (currently £85,000 per annum).
- MTD will become mandatory for those below this threshold from April 2019.
VAT: From April 2019 all VAT registered businesses (including limited companies) will have to file their VAT returns directly from accounting software. The current online VAT return will cease to be available.
Corporation Tax (limited companies): MTD will become mandatory for corporation tax reporting from April 2020.
What are the exemptions?
The smallest businesses and landlords with gross income of less than £10,000 will be exempt. Also exempt are those who are not able to engage digitally for religious reasons or due to a factor such as age, disability or location (eg, no availability of broadband).
What do I need to do now?
The action required depends on the size and structure of your business and how you currently keep your records – we will need to discuss your transition to MTD with you.
If you currently use accounting software, most of the providers are building funtionality into their packages. You may need to upgrade to the most recent spftware release, please speak to us should you require any advice. Now is an ideal time to consider moving to a cloud based accounting package which is fully MTD complaint, we partner with the leading software providors, please speak with us for more advice.
- If you currently maintain records on paper or a spreadsheet, your processes will need to change. You will need to make your own quarterly submissions to HMRC or provide records to us promptly after each quarter-end and engage us to do the bookkeeping and quarterly reporting.