18 July, 2018 in Industry News

Making Tax Digital

Making Tax Digital is a government initiative to ‘make it easier for individuals and businesses to get their tax right and keep on top of their affairs – meaning the end of the annual tax return for millions’.  It is set to revolutionise the UK tax system and ultimately bring an end to the need for self-assessment.

At the moment, the self-assessment process is essentially a one-way process which provides little value other than meeting compliance needs. 

By introducing a fully digital tax system by 2020, Making Tax Digital aims to make the administrative process easier, more efficient and more effective and reduce HMRC overheads incurred when managing tax affairs. 

Changes will apply to a wide range of tax payers including most businesses, landlords and self-employed professionals.  It will require digital records to be maintained using compatible software – essentially the creation of a digital tax account.

Similar to a bank account, a digital tax account will bring individual taxpayer’s details together in one place, allowing them to view their tax affairs in real time, update their information, register for new services, view how their tax is being calculated and choose payment options.

At the moment the key dates are:

From April 2019, quarterly reporting is:

  • Mandatory for VAT for all VAT-registered businesses with a turnover above the VAT registration threshold (£85,000)
  • Optional for VAT-registered businesses with a turnover below the VAT registration threshold (£85,000)

From April 2020 (at the earliest), quarterly reporting is:

  • Mandatory for income tax and corporate tax (as appropriate) for all businesses (including landlords) with a turnover over the VAT registration threshold (£85,000)
  • Optional for businesses (including Landlords) with a turnover below the VAT registration threshold (£85,000).

A large majority of VAT-registered businesses already report VAT on a quarterly basis.  If your business already reports on a quarterly basis then other than a technical change to how you report, the type of data and the frequency with which it is reported is unlikely to change from April 2019.

However, if your business is not yet reporting on a quarterly basis, then you need to start preparing for how Making Tax Digital may impact you.   Considerations include:

  • From April 2019 onwards supporting digital documents to be submitted along with your online VAT return
  • Final VAT quarter return should reflect full year accounting gross profit (except for Non- VAT items e.g. wages, insurance, rates)
  • Preparation of management accounts in line with quarterly VAT returns
  • Annual accounts to be finalised earlier (almost 11 months earlier)


To discuss any of the points raised above, please contact Gabrielle McArdle in our Tax Department.

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Whilst every effort has been made by CavanaghKelly to ensure the accuracy of the information here, it cannot be guaranteed and neither CavanaghKelly nor any related entity shall have liability to any person who relies on the information herein. Information given here is for guidance only. Detailed professional advice should be taken before acting on any information contained herein. If having read the guidance here, you would like to discuss further; a member of our team would be pleased to help you.