– HMRC are making a big push to get away from annual tax returns and reporting, instead wanting taxpayers and businesses to report and pay tax much more regularly.
– HMRC intend for all self-employed businesses earning turnover between £10,000 and £83,000 to be using the new reporting functions as of April 2018. This also applies to landlords of rental properties.
– Self-employed businesses earning more than £83,000 will be expected to follow suit from April 2019. This too also applies to landlords of rental properties.
– All corporate businesses will then start using the new functions from April 2020.
So how will this work for business owners?
– Businesses will complete their bookkeeping on a regular basis, instead of waiting until the end of the year. HMRC have access to bank account data, so if a submission was made without transactions in order to avoid doing the bookkeeping correctly, it is likely that HMRC would find out.
– Businesses already using accounting software such as Sage, Xero or Kashflow are already most of the way there, especially if they are reporting VAT returns quarterly. The larger software companies have already committed to making their software compliant with the new rules.
– Businesses who use handwritten or spreadsheet based records will need to either use the Government’s own free software, or purchase some accounting software. HMRC have suggested that they may accept certain data via Excel spreadsheets, but this has not been confirmed. The HMRC software is not yet available for use.
HMRC are committed to improving the “Government Gateway” system, so that all of your real time financial information is available via that service. MTD is just one of the tools they are using to do this. They will also be receiving information from the banks about any interest income you are receiving.
Another big point to come from the initial consultations is that, from April 2019, Capital Gains Tax due on the disposal of residential properties would be due and payable to HMRC within 30 days (!) of the sale of the property.
We at Matthews Hanton are keen to support small business owners through the process of changing their accounting systems and adapting to the new requirements. The new reporting rules mean that we will need you to contact us before or as things happen that you need to report to HMRC, as we will not be able to deal with them in arrears as has happened previously. We look forward to working with you so as to minimise the burden on you whilst you run your businesses.