Every individual and every business now has access to an HMRC account which, by 2020, will show their overall tax situation. VAT, PAYE, Self Assessment Tax and Corporation Tax accounts will all be in one place giving an individual or business owner an overview of their personal and/or business tax liability. Individuals will be able to access this account from a digital device at any time to see their tax situation, update their information or register for new services.
This is just one aspect of Making Tax Digital (MTD) which the Government announced in their Budget two years ago. The most important part for businesses and the self employed to be aware of is that MTD requires the submission of quarterly accounts information to HMRC. Submissions will be made directly from the accounts software you currently use. Paper accounting records will not be accepted but it has been indicated there will be some free software available to those who do not use accounting software so that submissions can be made digitally.
MTD has been introduced because the Government believe that whilst the majority want to get their taxes right there are errors and by submitting information quarterly this will help businesses get it right. They also believe it will be helpful to businesses to have a clearer view of their tax position throughout the year.
Quarterly submissions will be required from:
- April 2018 for businesses which pay income tax and Class 4 NICs with a turnover over the VAT threshold
- April 2019 for businesses which pay income tax and Class 4 NICs with a turnover below the VAT threshold (even if VAT registered) and above £10,000
- April 2019 for all businesses for VAT
- April 2020 for all businesses for Corporation Tax
Those in employment who have secondary income above £10,000 per year will have to submit quarterly digital returns.
The first quarterly submission will be required within one month and 5 days (5th) of the end of the quarter after year end. A sole trader who is over the VAT registration threshold and has a March year end will have to submit their first return for April to June 2018 by 5th August 2018. A sole trader who is over the VAT registration threshold and has a December year end will have to submit their first return for January to March 2019 by 5th May 2019.
The final return for the year can be submitted up to 10 months after the year end and can include amendments and adjustments to the quarterly returns.
MTD is less than a year away for many unincorporated businesses so it is time to review your processes, make sure you are using accounts software that will be ready for MTD from April 2018 and get into the habit of keeping your accounts up to date.
Those businesses who are VAT registered will already keep quarterly accounts for their VAT return but for those who are not organised and only submit income on their VAT return because they have not gathered together all their expenses will find their quarterly tax liability higher than they might expect.
We will be helping all our customers with their quarterly submissions as we do now for VAT so if you would like some help to develop a process for keeping your accounts up to date quarterly give us a call. We will be happy to help you get organised.