This week the Government finally issued its response to the MTD consultations, and published some draft legislation which will underpin the MTD filing requirements.
However, the MTD story is not complete. There will be further MTD consultation papers published later this year to cover; corporates and complex businesses, and the MTD penalty regime.
We do know the Government is determined to keep to its timetable of requiring quarterly updates from:
· April 2018 for businesses and landlords who pay income tax,
· April 2019 for VAT, and
· April 2020 for corporation tax.
Partnerships with turnover of £10 million or more will not be brought into MTD reporting until 2020.
We don’t know what the minimum threshold will be for making MTD reports, – this could be annual turnover of £10,000 as proposed in the consultations, or a higher figure. The next tier of businesses between that minimum threshold and another undetermined higher threshold will have a delayed entry to MTD reporting, possibly for another year. These thresholds will be included in the draft Finance Bill to be published in March 2017, and will probably announced in the Budget on 8 March 2017.
Businesses and landlords will be permitted to use spreadsheets to record day to day transactions, but the data must be transferred to some other accounting software to be submitted to HMRC each quarter. Trials of MTD-compliant software are due to start in April 2017.
Those businesses who are permitted to submit three line accounts on their tax returns (receipts, expenses and profit), will be permitted to submit only those three totals to HMRC each quarter. Three line accounts can currently be used by any unincorporated business with turnover under the VAT registration threshold.
All other businesses will have to submit totals of income and expenses as detailed in a schedule, see the illustrations in the MTD legislation overview. The schedule for partnerships is particularly onerous.
An end of period statement for the accounting period will have to be submitted to HMRC by the earlier of; 10 months after the accounting period end, and 31 January. So businesses with a 31 March year end will have to submit their year end statement by the following 31 January, as is the case now.
Written by the Tax Advice Network