So what does this mean for you as a business owner and a tax payer?
The new digital tax accounts (DTAs) will require most self-employed people, businesses and landlords to keep track of their tax affairs digitally and update HMRC “at least” quarterly. ‘This will give individuals and businesses a more convenient real-time view of their tax affairs, providing them with greater certainty about the tax they owe,’ said Osborne in his autumn statement speech.
So what does digital form actually mean?
Surprisingly this does not mean an excel spreadsheet. In fact each business and landlord will have to use a form of accounting software which will have a capability to communicate with HMRC’s systems.
When is this going to happen?
The plan was to implement the scheme for income tax and NICs from April 2018, VAT from April 2019 and corporation tax from April 2020. However, due to other pressing matters the MTD initiative was removed from the finance bill 2017.
HMRC have however this week announced that making tax digital is back! From 2019 businesses that are over the VAT threshold will be required to keep digital records for VAT purposes.
Other businesses will be required to keep digital records and update HMRC quarterly from 2020 (instead of 2018 as originally proposed)
What does this mean? Like it or not, making tax digital is going to happen, but the good news is that deferral has meant that business owners have more time to prepare for the inevitable change.