A number of selected small businesses have begun submitting tax returns under HMRC’s Making Tax Digital (MTD) pilot scheme.
The Revenue asked for businesses to step forward and trial the digital process from April 2018.
HMRC is monitoring the progress of businesses and sole traders, who have been submitting tax returns to help shape the system before it’s rolled out for VAT only next year.
Five products are believed to be involved in the pilot scheme, following an extensive beta testing programme which involved 18 developers and took a year.
Two suppliers – IRIS and Rhino – have trial products available to send income tax updates. Their features include:
- testing digital record-keeping
- sending updates to HMRC
- providing a tax estimate from HMRC based on updates.
The Revenue has confirmed businesses will be allowed to continue using spreadsheets for record-keeping, but they will need to ensure the spreadsheet can submit MTD updates.
This is likely to be done through use of an application programming interface (API), which will enable commercial software to share data with HMRC’s servers.
MTD is due to come into force from April 2019, at which point VAT-registered businesses will be obliged to submit quarterly reports to HMRC for VAT only.
Eventually, most firms and the self-employed will need to use relevant software to keep their tax records, provide quarterly summaries of tax data and submit a finalised year-end position to HMRC.
At least five tax returns (four quarterly updates and one annual declaration) will need to be filed each year when MTD is fully rolled out.
It will change the way most businesses keep accounting records, how they report their income to HMRC and the services required from their accountants or tax agents.
MTD was originally due to come into force for income tax and national insurance contributions in April 2018, with the first quarterly updates due to be filed in July 2018.
The scheme was delayed by 12 months for VAT-registered businesses in July 2017, while MTD won’t be phased in for other taxpayers until at least April 2020.
We’re happy to chat about MTD. Contact Vicki Harper