MTD is an important part of the government’s plans to make it easier for individuals and businesses to get their tax right and keep on top of their affairs especially cash-flow. This could mean the end of the annual tax returns, which has given millions sleepless nights especially in January.
Everyone in the UK now has access to their own personalised digital tax account and these are being regularly expanded and improved. HMRC’s ambition is to become one of the most digitally advanced tax administrations in the world; sounds simple but there have already been a number of system issues stalling the start of MTD.
HMRC want taxpayers to get their tax right and reduce the amount of tax lost through avoidable error. Accordingly, businesses will be mandated to use MTD from April 2019; however, this will only apply to businesses who have a turnover above the VAT threshold (currently £85,000). Smaller businesses do not require to use this system from then, although they can choose to do so voluntarily.
There are four foundations of MTD, namely:
- BETTER USE OF INFORMATION: HMRC believes that MTD provides significant benefits to both businesses and individuals. Digital tax accounts for all will mean that taxpayers can review the information which HMRC holds and be able to check at any time whether their details are complete and correct. HMRC can then use this information to tailor the services it provides.
- TAX IN REAL TIME: Businesses and individuals will not have to wait until the end of the year or even longer to know how much tax they should pay. AEL Markhams will be able to securely show each client their up to date tax statement via our website together with copies of current and past accounts and tax returns.
- A SINGLE FINANCIAL ACCOUNT: Currently, most taxpayers cannot see all their liabilities and entitlements in one place. HMRC are hoping that, by 2020, clients may see a comprehensive financial picture in their digital account, just like they can with online banking.
- INTERACTING DIGITALLY WITH CLIENTS: AEL Markhams will be able to interact with HMRC digitally to provide real time access to a digital account which will present them with an increasingly personalised picture of their tax affairs, along with prompts, advice and support.
How will this affect me?
Businesses and individuals will have to prepare six returns annually when MTD comes into play. There will be:
- Four returns prepared by AEL Markhams
- An HMRC return which will ‘populate’ figures into the return based on information which it has received from employers, bank and building societies and other government departments
- A final return, prepared by AEL Markhams, which will “sweep up” any figures not already included in the previous returns such as accruals, prepayments and other relevant adjustments.
Please contact Pratul Shah to discuss any aspects of Making Tax Digital: