The Making Tax Digital initiative will modernise the UK tax compliance processes by adopting Digital Record Keeping, more frequent updating of compliance data, & making better use of 3rd-party information.
HMRC is replacing tax returns with digital tax accounts for businesses and individuals. A digital tax account brings together each taxpayer’s details in one place, just like an online bank account. Taxpayers will be able to view their tax affairs in real time, update information, register for new services, see how their tax is calculated & choose payment options.
From April 2019, quarterly reporting is Mandatory for VAT for all VAT-registered businesses turning over more than the VAT registration threshold (£85,000) & Optional for VAT-registered businesses with a turnover below it. The 04-06 2019 VAT return will be the first return required to be filed under to the Making Tax Digital regulations.
From April 2020, quarterly reporting is Mandatory for income & corporation tax for all businesses (including landlords) with a turnover over the VAT registration threshold
The vast majority of VAT-registered businesses already file quarterly VAT returns so, other than a technical change to the actual method or reporting, data & frequency of report is unlikely to change.
Digital records are records that are captured & held in electronic/digital format and can viewed on a computer etc. This includes a digital image/copy of a paper record (such as a photo taken on a phone) an entry into an accounting system etc. The record itself must include the date, amount and category of each business transaction.
Everyone is affected as HMRC plans to digitise the income tax system. However, the need to report income quarterly (which is just part of MAKING TAX DIGITAL for income tax) will not impact everyone.
For individuals, only trading or property income needs to be reported quarterly if income is over the threshold. Initially, the threshold will be aligned with the VAT registration threshold.
There will be the need for quarterly & annual submissions for each trade to confirm the annual figures, and then finally a declaration to confirm all income for the tax year. This means that there will no longer be a requirement to submit a self-assessment tax return once MAKING TAX DIGITAL for income tax is in full swing
The same thresholds and requirement to submit quarterly information applies to partnerships although a partnership needs to include all income for the period, not just trading and/or property income.