Over the next few tax years, MTD will be introduced for all businesses and landlords, including companies and partnerships. The main changes are:
Initially, HMRC were pushing for MTD to be implemented for unincorporated businesses from April 2018. However, following a statement from the Paymaster General, Mel Stride, on 13 July 2017, this has been deferred until April 2019, but only for VAT registered business and only for VAT. It is to be rolled out for other taxes from April 2020 at the earliest.
There are different requirements for different types of businesses. Those who are partnerships, self-employed, trusts, landlords and companies are all affected.
Any action required will depend on the size and structure of your partnership or business and how you currently keep your records. Crowe Clark Whitehill can support you through these changes and provide the ongoing services that you need. However, the changes are so fundamental that it will be necessary to review your current record keeping systems and to agree the services required.
Closer to your start date, you will need to consider:
Your MTD start date depends on the size and structure of the partnership and your accounting year end. We can discuss your specific start date with you, but in general, for partnerships, MTD will become mandatory as follows:
What else do I need to know?
When does it start?
Your MTD start date depends on the size and structure of your business and your accounting year end. We can discuss your specific start date with you, in general, income tax for self-employed, partners, trusts and landlords who all complete self-assessment tax returns will become mandatory:
MTD will be mandatory for corporation tax reporting from at least 1 April 2020
Who is exempt?
How will quarterly reporting work?
From your start date, details of your income and expenditure will need to be reported to HMRC within a month of the end of each quarter. The submission of the information must be made using accounting software (or a spreadsheet if you are self-employed, partners, trusts and landlords who all complete self-assessment tax returns). After the fourth quarter is submitted, an annual finalisation return will need to be submitted, typically within 10 months of the final quarter. This is anticipated to replace the usual self-assessment partnership tax return and may replace the annual self-assessment tax return if you are self-employed, partners, trusts and landlords who all complete self-assessment tax returns.
We believe these changes are a positive step forward towards a digital and more efficient tax system.
Closer to real time reporting may help business owners to better understand changes to their business as they occur, rather than when annual accounts are prepared, which may be several months later.
It will also assist in budgeting for tax liabilities as the year progresses.
However, it is acknowledged by the profession that the change will cost businesses. Estimates vary widely. For example, Tax Research UK have suggested the cost to be approximately £308 per taxpayer although the Federation of Small Businesses believe the cost could be £2,770 per taxpayer.