Making tax digital (MTD) for business is going ahead, but HMRC is not advertising its progress, so what’s happening and where can you find out more?
The first thing to understand is the MTD project has been designed on a tax by tax basis, so the MTD pilot for income tax is quite separate to the MTD pilot for VAT. This distinction between the taxes is expected to continue, so that businesses will have to make separate MTD returns for each tax they need to report to HMRC. It is possible that sophisticated accounting software will make these various tax returns appear to be part of one seamless process, but don’t hold your breath.
Income tax pilot
The income tax pilot is currently accepting sole traders who have income from just one business. Individuals landlords can also apply to join this pilot, if their let properties are located only in the UK. Landlords of furnished holiday lettings are not yet accepted on to the pilot. Landlords who have other non-rental income can take part in the MTD pilot, but they will have to submit a SA tax return as well to report their other income for the year.
As an agent we can sign-up clients for the pilot, but we and/or you must be using MTD-compatible software. There are just four software suppliers who have products approved for this pilot, one of which (Rhino) doesn’t provide agent access. ICAEW has been told that there are around 20 software providers working with HMRC on products suitable for MTD for income tax, so more products may be added to the approved list shortly. There is no start date for compulsory filing of MTD income tax reports, it will not be earlier than April 2020, but may be some time later.
The MTD for VAT pilot started on 11 April 2018, but it is only open to businesses who have been specifically invited to take part, and HMRC is restricting access to the simplest of businesses. HMRC say they will open the VAT pilot to public beta testing later this summer, and at that stage a list of software providers will be published.
Apparently over 130 software companies are working with HMRC on products suitable for MTD for VAT. This includes some products which will act as a front-end to spreadsheets (aka bridging software) to submit the spreadsheet data via an API to HMRC. The official advice is to speak to your software provider about the timetable for release of MTD-compliant products.
HMRC has released three different MTD webinars which are available to listen to from its help and support for MTD page, but they are not very informative. More useful information may be gained from the CIOT or ICAEW webinars on the topic.
Written by the Tax Advice Network