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MTD - Extra Year

MTD - Extra Year for Under VAT Threshold Landlords & Unincorporated Businesses

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"3.39 Digital administration – The government will provide an extra year, until April 2019, before Making Tax Digital is mandated for unincorporated businesses and landlords with turnover below the VAT threshold. This will provide them with more time to prepare for digital record keeping and quarterly updates. The government will also consult on the design aspects of the tax administration system, including interest and penalties, with the aim of adopting a consistent approach across taxes. This will simplify the system for taxpayers. (17)"

A welcome concession which will help, including more time to discover and correct the inevitible problems with the system.

Any comments?

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By Chris Mann
08th Mar 2017 14:13

Many thanks Tornado. Possibly the news we realistically expected, or hoped for?
I'm still sceptical that HMRC are capable of pulling this off though, given the massive decrease in resources in the last few years. This is a Government department with serious issues.
It seems that the capable and experienced staff left years ago.

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By mabzden
08th Mar 2017 14:20

Personally I'm not sure why this helps. It still means HMRC has to rush to get MTD systems ready, but in the first year of operation MTD will exclude the small taxpayers we've been told the scheme is aimed at "helping".

So now there's a big rush to get VAT registered businesses to do quarterly submissions as from April 2018. Err... but aren't they already doing that?

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to mabzden
08th Mar 2017 14:23

mabzden wrote:

So now there's a big rush to get VAT registered businesses to do quarterly submissions as from April 2017. Err... but aren't they already doing that?

2017??? The earliest reporting date will be April 2019 surely? The only change I can see for VAT registered companies is a further breakdown of expenses for MTD purposes and a possible 7 days less to submit a return.

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By mabzden
to legerman
08th Mar 2017 14:31

I had corrected my typo. But thanks for quoting me anyway!

As I understand it, unincorporated businesses with t/o above the VAT threshold will still need to do MTD submissions as from April 2018. So all the systems will need to be in place by that date.

Am I wrong?

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to mabzden
08th Mar 2017 14:51

I'd like somebody to confirm or otherwise, but I have been told that if annual accounts go to 31 March, you don't start until April 2019. If using 5 April, you have to start in April 2018. So sole traders, if they arnt already, can just change their year end to 31 March.

However, that's not available to landlords, so landlords have to start a year earlier than sole traders.

Is that right, or was it a dream ?

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to mabzden
08th Mar 2017 16:36

mabzden wrote:

I had corrected my typo. But thanks for quoting me anyway!

As I understand it, unincorporated businesses with t/o above the VAT threshold will still need to do MTD submissions as from April 2018. So all the systems will need to be in place by that date.

Am I wrong?

I saw the 2017, but hadn't realised it was a typo, sorry

Having read the rest of the thread before replying the situation I believe is as follows.

April 2018 Unincorporated businesses with t/o over the VAT threshold and pay tax/N Iwho are not VAT registered

April 2019 All other unincorporated businesses with t/o over 10k whether VAT registered or not.

April 2020 Incorporated businesses.

There will be a lot less businesses needing to be MTD ready by 2018 so the pressure is off vastly.

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By Tornado
to legerman
08th Mar 2017 16:57

"April 2018 Unincorporated businesses with t/o over the VAT threshold and pay tax/N I who are not VAT registered"

I can see that this is a reasonable interpretation but how many businesses are there over the VAT threshold but not VAT registered? It can only be a handful and Landlords with substantial rents are ruled out as they do not pay Class 4. It makes no sense.

Unless ..... we have missed something and Class 4 is going to be applied to Rental Income in the future !!!

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By mabzden
to legerman
08th Mar 2017 17:07

legerman wrote:

I saw the 2017, but hadn't realised it was a typo, sorry

No worries.

I think the debate has moved on though - see here:

https://www.accountingweb.co.uk/any-answers/mtd-argh

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By Tornado
to mabzden
08th Mar 2017 14:29

Current VAT quarters may not align with trading quarters so this may mean 8 quarterly submissions a year!

There may be developments with this as the original idea of staggered VAT quarters was so HMRC did not have to deal with most VAT Returns being submitted at the same time. I would hope that the HMRC technology can deal with this better now but also bearing in mind that VAT submissions will possibly use different data to MTD submissions.

Still much to sort out here.

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By Chris Mann
to mabzden
08th Mar 2017 14:30

Realistically, you didn't expect that any of this would make sense, did you?

HMRC are simply not ready, or capable to launch MTD with any certainty, in the time frame, which they set.

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By Tornado
to Chris Mann
08th Mar 2017 14:45

I absolutely agree.

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By Tornado
to mabzden
08th Mar 2017 16:26

"but in the first year of operation MTD will exclude the small taxpayers we've been told the scheme is aimed at "helping"."

I don't think anyone actually believed the tripe about MTD helping those under the VAT Threshold, but it does seem a strange thing to do.

Note that the VAT registration threshold increases to £85,000 from 1st April 2017.

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to mabzden
08th Mar 2017 18:35

mabzden wrote:

Personally I'm not sure why this helps. It still means HMRC has to rush to get MTD systems ready, but in the first year of operation MTD will exclude the small taxpayers we've been told the scheme is aimed at "helping".

Helping ?

MTD is a big price to pay for "help" they could already have if they wanted it.

Anyone can go out now and buy accounting software. The majority do not. Because they don't need it and wouldn't find it helpful.

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08th Mar 2017 14:18

Totally agree. 2018 was always too tight, especially with the Brexit upheaval last year.

HMRC now have a year to a year and a half to get things properly into place. They can also let taxpayers know in a timely fashion, without it being dropped as a massive bombshell with just months to go. The only people likely to be p***ed off are the software vendors, which I won't be losing any sleep over.

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By mabzden
to legerman
08th Mar 2017 14:25

I don't see how this can be seen as pushing back the deadline. The (tight) deadline to roll out the MTD system is still the same, but the very group the policy is aimed at is just being excluded for a year.

It doesn't make much sense to me.

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By Tornado
to mabzden
08th Mar 2017 14:34

As there is nothing else of relevance to MTD in the Report, I think this concession has been shoehorned in at the last minute and has not been properly thought out, but it is still a significant concession and will enable us to continue firmly reminding the Government of the many potential problems with MTD.

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By DJKL
08th Mar 2017 14:37

I thought vat registered business was April 2019, so surely now nearly everyone is April 19 except Limited Companies who are not vat registered who are still 2020, or have I now got myself totally confused.

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By Tornado
to DJKL
08th Mar 2017 14:43

Unincorporated Businesses (and presumably Landlords) with sales (rents) over the VAT Threshold (£85,000 from 1st April 2017) will still have to start MTD reporting from April 2018.

Well that is the current position but I/we still have a year to get that delayed as well.

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By DJKL
to DJKL
08th Mar 2017 14:46

Got that wrong, this seems to say those with t/o over vat threshold but not vat registered are April 2018, if I have understood:

Businesses, self-employed people and landlords will be required to start using the new digital service from:

April 2018 if they have profits chargeable to Income Tax and pay Class 4 National Insurance contributions (NICs) and their turnovers are in excess of the VAT threshold

April 2019 if they have profits chargeable to Income Tax and pay Class 4 NICs and their turnovers are below the VAT threshold

April 2019 if they are registered for and pay VAT

from April 2020 if they pay Corporation Tax (CT)

https://www.gov.uk/government/publications/making-tax-digital-for-busine...

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By Tornado
to DJKL
08th Mar 2017 15:10

The wording is a bit ambiguous and the reference to "profits chargeable to income tax and class 4 NIC" is confusing. Landlords do not pay Class 4 yet the wording refers to those who pay income tax AND class 4 NIC.

I interpreted the point about VAT in 2019 as relating to those under the VAT threshold who have voluntarily registered for VAT, of which I do have a few clients.

So taking this literally, the only businesses that need to operate MTD from April 2018 are those with a turnover over the VAT threshold who are not registered for VAT.

This does need to be defined in greater detail.

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By mabzden
to DJKL
08th Mar 2017 15:07

I don't mind admitting that I'm a tad confused.

So do we agree that there are some businesses that will still need to file as from April 2018?

I'm still thinking the April 2019 VAT deadline may be to force businesses to complete VAT Returns via the MTD system. The self-assessment system is being brought into MTD separately in April 2018 and April 2019.

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to mabzden
08th Mar 2017 14:59

any businesses with turnover over £83k will need to file from April 2018.

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By mabzden
to petersaxton
08th Mar 2017 15:13

I agree (I think). Assuming it's an unincorporated business.

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08th Mar 2017 14:37

Thanks.

As a former colleague used to say "Big fat hairy deal!". Absent a substantial re-think (which isn't going to be substantial enough), it's just putting back a bad idea by 12 months. The usual 'introduce an appalling badly thought out' proposal, tinker round the edges, postpone implementation and then when it comes in say "we did listen and we've given you time".

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By Tornado
to Accountant A
08th Mar 2017 14:40

"it's just putting back a bad idea by 12 months"

Agreed, but it does give us more time to push for major changes without having to immediately worry about our smaller clients.

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08th Mar 2017 14:43

I think giving businesses with turnover under £83,000 an extra year IS a big deal. Accountants can concentrate on dealing with MTD with their bigger clients and then help to prepare their smaller clients later.
If an accountant has to change 100 clients in one year then surely it's better to change 50 in one year and 50 the next year.

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By Matrix
to petersaxton
08th Mar 2017 14:46

Who are those 50 though? Do you mean VAT exempt businesses with turnover >VAT limit, since surely VAT registered businesses were already deferred until April 2019?

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to Matrix
08th Mar 2017 14:53

why do you say that? VAT registered businesses have to start from April 2018.
Now businesses with turnover less than £83k dont have to start until April 2019.

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By DJKL
to petersaxton
08th Mar 2017 14:54

But surely the bulk will now be April 2019, there are surely not that many over vat reg threshold but not registered that will go live in April 2018, so you have that concertina effect.

For me the catch is one of our larger entities is a property investment partnership which has a pretty substantial rent roll and it is not vat registered (no options) and of course it is the entity with the most complex accounting re transactions with/for other group entities, just my luck!!

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to DJKL
08th Mar 2017 14:56

I dont know what you mean.
there will be many businesses with turnover under £83k which wont have to start MTD until April 2019.

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By DJKL
to petersaxton
08th Mar 2017 15:01

I thought we were now at:

those that are vat registered start April 2019

those below threshold for vat start April 2019

those above threshold for vat but not registered start April 2018

But to tell you the truth the wording, below , is weird:

"Businesses, self-employed people and landlords will be required to start using the new digital service from:

April 2018 if they have profits chargeable to Income Tax and pay Class 4 National Insurance contributions (NICs) and their turnovers are in excess of the VAT threshold

April 2019 if they have profits chargeable to Income Tax and pay Class 4 NICs and their turnovers are below the VAT threshold

April 2019 if they are registered for and pay VAT

from April 2020 if they pay Corporation Tax (CT)"

https://www.gov.uk/government/publications/making-tax-digital-for-busine...

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to DJKL
08th Mar 2017 15:12

"Businesses, self-employed people and landlords will be required to start using the new digital service from:

April 2018 if they have profits chargeable to Income Tax and pay Class 4 National Insurance contributions (NICs) and their turnovers are in excess of the VAT threshold
April 2019 if they have profits chargeable to Income Tax and pay Class 4 NICs and their turnovers are below the VAT threshold
April 2019 if they are registered for and pay VAT
from April 2020 if they pay Corporation Tax (CT)"

This is right except for "April 2019 if they are registered for and pay VAT"

What you quoted must have been an incorrect earlier version.

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By DJKL
to petersaxton
08th Mar 2017 15:10

They have got an extra year, they have got to April 2019, but those over threshold, but not vat registered, are still April 2018 it appears.

[***] up and.......

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to DJKL
08th Mar 2017 15:14

it's the threshold that is important not whether they are registered for VAT

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By DJKL
to DJKL
08th Mar 2017 15:08

Just spotted my out- rely on HMRC guidance.

They say,

"have profits chargeable to Income Tax and pay Class 4 National Insurance contributions"

but our property partnership pays no class IV, so I can rely on the "and" not to bother. :)

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08th Mar 2017 15:12

My understanding is that MTD will apply to the first accounting period starting after 5 April 2018 (unless exempted)

So businesses with a 5 April year end (and landlords) will make submissions quarterly from April 2018.

Businesses with a 31 March year end (most of them I suspect) will have a first accounting period starting on 1 April 2019, and are in MTD from that date.

Excepted businesses, with turnover under VAT limit, will join in one year later.

There's the option to consider changing 5 April year ends to 31 March to get an extra year (unless there's some anti-forestalling provision that I'm not aware of) However, I prefer to keep subbies on 5 April to tie in with CIS statements. I'll review the others and see if it's worth it.

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to Cloudcounter
08th Mar 2017 15:17

changing 5 April year end to 31 March would give you LESS time. only by three months and not year. I will want my clients to be doing online bookkeeping for a full year though, anyway.

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to petersaxton
08th Mar 2017 17:23

What Cloud Counter is saying happily confirms what I've been asking/saying. For sole traders with a 31 March year end, MTD starts from April 2019, but with a 5 April year end it is April 2018.

Do you think somebody mentioned this anomoly to SS Phil, hence his very 'generous' offer of delaying for a year (even though we were already all planning to delay for a year thanks)

This anomoly doesnt apply to landlords because they all have to use 5 April as their year end, hence the Class 4 NI bit, which means there isn't any 'generous' delay for them. Maybe.

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to petersaxton
09th Mar 2017 12:06

Not the way I see it but not going to debate

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By Tornado
08th Mar 2017 15:20

Massive confusion now about the definitions of who starts MTD and when.

Don't you just love Mr Hammond and his merry MTD team, yet again proving that they have not a clue about what they are doing and an inexcusable ignorance about the way the tax system works

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By DJKL
to Tornado
08th Mar 2017 15:25

Agreed- I really cannot see how the vat registered business at April 2019 ties in with the other two on the list.

I think another chat with my other half re downsizing and packing all this up is on the cards.

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08th Mar 2017 15:21

Aren't these the rules:
no MTD if turnover under £10k
MTD April 2018 for landlords and self employed with turnover over £83k
MTD April 2019 for landlords and self employed with turnover under £83k
MTD April 2020 for companies

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By mabzden
to petersaxton
08th Mar 2017 15:41

That's my reading of the situation.

Plus VAT Returns (for any type of business) to be filed via the MTD system as from April 2019.

NB. As another contributor pointed out in a non-smarty pants way, the VAT threshold is rising to £85K on 1 April 2017. So the thresholds above will need to be scaled up.

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to mabzden
11th Mar 2017 08:50

mabzden wrote:
So the thresholds above will need to be scaled up.

They might be but they don't NEED to be.

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By DJKL
to petersaxton
08th Mar 2017 15:35

Peter, I have given up trying to understand, as per this other A Web source we are certainly, in the words of Genesis, in a Land of Confusion.

https://www.accountingweb.co.uk/tax/hmrc-policy/budget-mtd-pause-for-tho...

"I must've dreamed a thousand dreams
Been haunted by a million screams
I can hear the marching feet
They're moving into the street.

Now did you read the news today
They say the danger's gone away
But I can see the fire's still alight
Burning into the night.

Too many men
Too many people
Making too many problems
And not much love to go round
Can't you see
This is a land of confusion."

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By Tornado
to petersaxton
08th Mar 2017 15:42

I believe this is right (VAT Threshold £85,000 as from 1st April 2017) plus the VAT relating to those that are perhaps under the threshold.

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to petersaxton
08th Mar 2017 19:02

petersaxton wrote:

Aren't these the rules:
no MTD if turnover under £10k
MTD April 2018 for landlords and self employed with turnover over £83k
MTD April 2019 for landlords and self employed with turnover under £83k
MTD April 2020 for companies


Quite a bit of confusion on here. Peter has the main rules right. MTD for income tax starts in April 2018 - the first accounting period starting on or after 6 April 2018. Landlords with gross rents >£85,000 (but possibly more by then) will be in on day 1.

The 2019 start date is both for businesses and landlords between £10,000 and the previous VAT limit BUT ALSO it is the planned commencement date for MTD for VAT, meaning VAT figures will be reported through MTD updates rather than logging on and filling in the VAT return on screen.

This IS a big deal for both businesses and Govt. It is the most expensive tax measure in the Budget, costing £280 million in total - the cost of deferring the additional tax that HMRC is expecting to collect as a result of the changes.

By all means change clients to 31 March year ends to gain a further year - coming in for income tax from 1 April 2020, but putting all clients on the same date risks a really lumpy work pattern with all quarterly updates falling in the same months.

And think about those with non-coterminous accounting periods / VAT period ends - yes it will double the number of filing dates once VAT is in MTD.

There is a slim chance that VAT might be pushed further down the road as the transition to income tax MTD has now been stretched out - only time will tell on that, but HMRC is well on track to start the pilot in 2017. Those in the pilot will file all 4 quarters AND a year end update before we start mass migrating, so all of the wrinkles should be ironed out before those for whom this will be a really big change have to come in. That was the real worry, so it does prove that HMRC did listen - and ultimately ministers have come up with a much better answer.
Corporation tax is down to commence in April 2020, as are very large partnerships, but if we get the "simple" scenarios built and working, we can then start moving out from there.

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to RebeccaBenneyworth
08th Mar 2017 19:53

RebeccaBenneyworth wrote:

This IS a big deal for both businesses and Govt. It is the most expensive tax measure in the Budget, costing £280 million in total - the cost of deferring the additional tax that HMRC is expecting to collect as a result of the changes.

Surely that figure is no more than a guess at best and misinformation at worst.

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to RebeccaBenneyworth
08th Mar 2017 21:34

Obviously Rebecca has got the hang of it before me. If caught up on the VAT registered companies bit now.
It's a very strange way to decide on MTD though. Who would have thought to introduce by reference to taxes rather than by reference to types of entities and turnover?
Another thing that is ridiculous is to change the rules so late in the day - although improvements are better late than never!
Given that MTD will have to be starting in the first quarter of a year it would be sensible to have the previous year completed before doing the next quarter. Therefore it would make sense to use the MTD software for the previous year. Unfortunately, accountants will be making decisions that affect their clients before HMRC/government are making up their minds.

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to petersaxton
09th Mar 2017 08:56

petersaxton wrote:

Another thing that is ridiculous is to change the rules so late in the day ....

It's inevitable if you make poor, hurried decisions without any proper consultation.

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