HMRC have already confirmed that they are committed to having Making Tax Digital (MTD) fully operational by 2020, and recently announced that they would be running a pilot scheme from April 2017 until April 2018. The pilot has now been launched, with customers (both businesses and agents) being invited to sign up for a new way to report income and expenses online. At different stages of the pilot, customers will help HMRC develop and improve the service by:
– using accounting software to record their business income and expenses;
– sending summary reports of their income and expenses direct from their digital records quarterly or more often if they choose; and
– signing up to go paperless.
Based on the information they report, customers will get an estimated tax calculation.
Once the new service has been tested with the first group of businesses and agents, other customers will be able to join the pilot. These customers will be able to report their income and expenses for the quarter they join as well as any previous quarters.
Businesses, self-employed people and landlords will be required to start using the new digital service from:
– April 2018 for income tax and National Insurance contribution (NICs) purposes, where the business turnover is over the VAT threshold (£85,000 for 2017/18);
– April 2019 for income tax and NICs purposes for businesses with a turnover below the VAT threshold;
– April 2019 for VAT purposes for everyone who is VAT registered; and
– April 2020 for corporation tax purposes.
Businesses, self-employed people and landlords with turnovers under £10,000 are exempt from these requirements.
Those in employment who have secondary income of more than £10,000 per year through self-employment or property will also be required to use the digital service.
Customers not included in the pilot will not be able to start sending quarterly reports to HMRC immediately, but they can:
– start to use accounting software to keep their records if they don’t already do so; and
– check with their software supplier, or agent, that any software they use, including spreadsheets, is compatible with quarterly reporting.