The government has delayed the rollout of Making Tax Digital, the initiative that will transform the tax reporting system to a totally digital structure. An amended timetable for Making Tax Digital has been set which will give accountants and businesses time to prepare and adjust processes to deal with the new system.
What is Making Tax Digital?
Making Tax Digital will be a compulsory digital tax system whose aim is to make the administration and reporting of tax easier and more accurate for self-employed individuals, landlords, companies and partnerships. When Making Tax Digital is fully implemented and proven to work, individuals and businesses will be able to use the system for all their tax reporting obligations, which will occur quarterly.
Making Tax Digital delayed until 2020 (2019 for businesses over the VAT threshold)
As a result of raised concerns “about the pace and scale of change contained in the proposals” for Making Tax Digital, HMRC has decided to push back the timeline of rolling out the new system to give individuals and businesses more time to adapt.
Making Tax Digital was originally planned to be used by most businesses, self-employed workers and landlords by the end of 2018, however this has now been delayed until 2020. From 2019, however, quarterly digital reporting through Making Tax Digital will be mandatory only for businesses with a turnover above the VAT threshold of £85,000.
The ICAEW welcomed this change, advocating that individuals and businesses should not have to be subject to overwhelming burdens to adapt to the new system in such a short amount of time. Accountants and their clients all over the UK agree.
The new timetable for Making Tax Digital:
Following the announced changes to Making Tax Digital proposals, the following updated timetable for implementation has been proposed:
|April 2019||For individuals and businesses (including self-employed)||Only for individuals and businesses above the VAT threshold (currently £85,000) will have to do digital recordkeeping of VAT and quarterly reporting to HMRC|
|April 2020||All businesses, self-employed people and landlords||All tax record keeping and reporting falling under the scope of Making Tax Digital|
The government has suggested that no business will be required to use the system before April 2019, and only then it will be those over the VAT threshold. It implies that this should be fairly straightforward as online VAT returns are already filed by 98% of VAT registered businesses.
Only after Making Tax Digital has been thoroughly tested and proved will it be rolled out to all businesses regardless of whether they are VAT registered.
HMRC will pilot the new system from 2018, and by 2019 businesses who aren’t VAT registered, or that are but are below the threshold, will be able to voluntarily register to use Making Tax Digital.
What does this mean for contractors and freelancers?
If you are using a contractor accountant who handles your tax recordkeeping and reporting, you don’t have to do anything because your accountant will have everything in place to be able to use Making Tax Digital on your behalf. All you need to do is continue to provide your accountant with all the information they need, including information from receipts and VAT records where required.
If you use an accountant for part of your business administration and complete some of the work yourself, you will be able to send quarterly updates to HMRC via the software or app that you are provided by your accountant.
To bring business in line with the evolving digital environment, we’ve developed our fully bespoke portal to make accessing and reading contract and accounting information easier for our clients. Clients of Churchill Knight & Associates Ltd can also access their portal from any device at any time, and be able to see their tax liabilities and available income with just the touch of a screen or button. As such, Making Tax Digital will be a straightforward transition.