As part of the spring budget, the chancellor has pledged that small businesses and landlords that fall under the VAT threshold will have an extra year to prepare for MTD; this is considered great news for the 3.1 million small businesses that fall into this category.
The announcement comes after many small business owners voiced their concern about the digital tax timeframes, with many citing they would need to make substantial investments on administration, software and technology upgrades in order to be ready to switch on the MTD deadline. Find out more about these changes, and what they mean for small businesses and landlords.
What Do These Changes Mean?
These changes mean that smaller businesses will have longer time to prepare for MTD and won’t be required to start reporting their tax digitally until 2019. The budget said regarding the matter:
“This will provide them with more time to prepare for digital record keeping and quarterly updates”
The change was announced in order give more preparation time and ease burdens on the businesses that need it most, allowing more time for them to train staff and familiarise themselves with the new obligations coming with digital tax, as well as purchase new accounting tools if necessary.
Businesses that have already prepared themselves for Digital Tax can still choose to begin keeping digital records and providing quarterly updates from the original April 2018 deadline should they wish do so. The only businesses currently exempt from digital tax are unincorporated businesses with a turnover of less than £10,000.
The remaining timeline for MTD for business is now as follows:
2018 – Businesses, self employed people and landlords with an annual turnover above the VAT threshold (£83,000) will be required to start reporting digitally and updating HMRC quarterly.
2019 – All businesses, self employed people and landlords with an annual turnover of above £10,000, will be required to start reporting digitally and updating HMRC quarterly.
2020 – All businesses that pay corporation tax will be required to start reporting digitally and updating HMRC quarterly.
What Is The VAT Registration Threshold?
Under the current VAT registration thresholds, you must register for VAT with HMRC if your businesses taxable turnover exceeds £83,000. If you are operating above the VAT threshold, you will not be applicable for the extra year to prepare and will need begin updating HMRC quarterly from your first accounting period starting 6th April 2018.
Need A Hand With Digital Tax?
Digital tax is going to mean computerised bookkeeping and quarterly reporting for businesses, at First Call, we wholly recommend preparing for this change as soon as possible. If you need any further help and advice on how to ensure your business is prepared for tax going digital, give one of our friendly team a call on 0117 3790810.
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This post was written by Steph Roffey