Chancellor Philip Hammond announced several big changes to the UK economy in the recent Budget.
One in particular that will have significant ramifications for small businesses and landlords is the news that the Making Tax Digital (MTD) scheme can be joined a year late by some small companies and landlords.
Unincorporated companies with an annual turnover lower than the VAT registration threshold of £83,000 can wait until April 2019 until MTD becomes mandatory, meaning they have more time to prepare for digital recordkeeping.
What’s more, the government will go through a new consultation process, looking at the design aspects of the tax administration in order to simplify the system for taxpayers. Among the areas covered will be interest and penalties.
MTD hopes to provide a digital alternative to the current tax system and help the UK develop one of the most efficient and sophisticated tax processes in the world by 2020.
The first wave of MTD will start from April 2018 and apply to businesses, self-employed people, landlords and workers who have a secondary income of over £10,000 a year from working as a sole trader or renting a property.
By April 2018, companies with a turnover in excess of the VAT threshold will need to have moved onto MTD, while those with a turnover between £10,000 and the VAT threshold along with any other VAT registered businesses are expected in April 2019.
April 2020 is the final deadline and is exclusively for companies that pay corporation tax.
Instead of providing a self-assessment tax return, businesses, contractors and landlords with a turnover of more than £10,000 will need to file quarterly round-ups of their income and expenses before an end-of-year declaration.
For firms operating a partnership, HMRC stipulates that one partner will be left accountable for introducing quarterly submissions, which will then flow through to the other's account.
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