HMRC, Tax Accountant

Making Tax Digital For Small Companies Part 5

Posted on by Kamlesh Rajput
Making Tax Digital report 2021
23
Sep

MTD for Small Companies

Making Tax Digital for Business is a Government initiative also known as MTD.  This is a legal requirement implemented and monitored by HMRC – Her Majesty’s Revenue and Customs.

Now that we know the meaning of understanding Making Tax Digital – MTD in Part 1 to 4, this is Part 5 of the series which explains MTD for Small Companies.

Key compliance

  • Keep records digital
  • Submit the return at least every 3 months
  • Final submission 10 months after year-end or 31 January whichever is sooner.
  • Pay your tax by 31 January after the year-end (can be paid early)

Date MTD compliance starts

You must follow the rules for your next accounting period that starts on or after 6 April 2023, if your taxable turnover from your self-employed business or income from the property is above £10,000.

Who will need to comply with MTD?

  • Sole traders
  • Partnership & each partner
  • Limited companies
  • Limited Liability Partnerships
  • Landlords
  • Individuals with over £10,000 as a second income.

Example 1:

Neil and his wife are directors of a small supply and fit plumbing company. It is busiest during the winter months and steady throughout the rest of the year. They have recently registered the company for VAT. Dave and his wife are the only employees.

  • Neil keeps the company’s business records on a spreadsheet
  • He has an accountant prepare the Corporation Tax (CT) return
  • Income fluctuates over the year and he worries about cashflow
  • He also worries about his tax obligations and keeping on top of different reporting/ payment cycles for different taxes
  • Whilst other areas of the company are easily managed ‘on the go’, tax management is not
  • Neil feels disconnected from the company’s tax position and misses out on useful support because he is not aware of it

MTD compliance for Neil

  • Neil chooses a third-party recordkeeping App to help him stay up-to-date throughout the year
  • The App supplies Neil’s accountant with the company’s records throughout the year
  • It also prompts Neil in real-time to check potential errors
  • Updating HMRC quarterly gives Neil more up-to-date information on the company’s cash flow and greater certainty about the company’s tax bill
  • He also links his company bank account to the App so that income and expenditure automatically populate the company’s quarterly update
  • All of Neil’s tax information is together in a single place. All he needs to do is review it and update the company’s digital tax account with HMRC
  • Neil has also authorised his accountant to view his digital tax account
  • Through the App, HMRC can also signpost Neil to relevant help and support such as webinars
  • The support feels tailored to the company and helps Neil to make the right decisions for the company

For more detailed information, please download the full report from this link.

Making Tax Digital Report

Our contact details are:

Sterling Finance UK Limited

Website           :           www.sterlingfinance.net

Email                 :           info@sterlingfinance.net

Tel                       :           0161 339 4989

Kamlesh Rajput