MOTD or MTD
Until recently I thought MTD was an abbreviation of the Match of the Day abbreviation (MOTD) and I have largely ignored it. However, MTD, or Making Tax Digital is something that has made the small print in the budget's of last two years. MTD has been described as the biggest single change to the UK Taxation system in last 40 years.
HMRC have been encouraging all their current Government Gateway customers to sign up for a Personal Tax Account (PTA). They claim seven million of us have signed up since its launch in December 2015. I have one and to be fair it does have some useful features, like state pension forecasting and pointing out any gaps in your National Insurance record.
MTD aims to do away with the annual self-assessment and annual corporation tax return, with a real time system where HMRC will load information about your tax code, bank interest, pensions etc onto your PTA.
HMRC are aiming to simplify the taxation system, you can already hear the groans from my professional colleagues who have heard similar things over the years. So this simplification will replace the single end of year tax return with four quarterly returns, yes, that's a lot easier!
The Government and HMRC say there are no plans in the pipeline for quarterly tax payments, like VAT, but it will be possible for you to make voluntary quarterly payments if you wish!
The FSB thinks that this simplification will add an extra administration burden to small companies and is likely to add £2,770 of extra cost. It is estimated that a sole trader spends on average 14 hours doing his annual self assessment, so they may need to invest another 42 hours.
This initiative is scheduled to start in April 2018 with the Self-employed being the first to be mandated. Many people believe Limited companies should be asked to use and test the system first since many will already have made the investment in accountants and software.
The good news for many of my Clients is that they are already future proofed and their additional cost is likely to be much lower, but for others the challenge is just beginning. So if you need to know more or want to get ahead of the game please contact me for a chat.