HMRC’s vision to digitalise the UK tax system is well underway. Businesses will be required to use commercial software to maintain their records and to update HMRC quarterly, starting with VAT.
On the 13 July 2017, HM Treasury and HM Revenue & Customs published its second Finance Bill of 2017, which includes changes to the proposed Making Tax Digital (MTD) initiative.
The government has said it believes that introducing a new digital tax system is still the right direction to move in. However, it has made amendments to the businesses this impacts and the timescales for change. The amendments to Making Tax Digital now means:
- Only VAT registered businesses will need to keep digital records and only for VAT purposes.
They will only need to do so from April 2019.
- Businesses will not be asked to keep digital records or update HMRC quarterly for other taxes until at least April 2020 (the original dates had implementation from April 2019).
What is the impact?
If you are VAT registered then you will need to move to digital record keeping (i.e. use software to record all your VAT invoices and receipts). If you are not VAT registered then digital record keeping is optional. However, these business owners can gain updated income tax estimates whenever they want, which will help with cash flow forecasting.
If you are VAT registered and do not yet use software to record your VAT information (invoices to customers and from suppliers) you need to start planning for MTD.
The new implementation date is April 2019.