Making Tax Digital Initiative Stalled!

HM Treasury has announced that the introduction of the Making Tax Digital initiative will be delayed until 2020.

In a surprising statement, the new Financial Secretary to the Treasury and Paymaster General (Mel Stride), announced significant changes to the projected Making Tax Digital (MTD) rollout, affecting the timescale as well as the businesses and taxes involved.

The most significant change is that MTD will only apply to VAT. From April 2019, businesses over the annual registration threshold (currently £85,000) will have to keep digital records for VAT purposes, submitting VAT returns to HMRC using MTD software.

HMT’s logic is that VAT-registered businesses already provide quarterly information, so this won’t involve more contact with HMRC. MTD for VAT will be piloted using small scale private testing towards the end of 2017, which My Digital Accounts will obviously participate in. Submission direct from accounting software will provide some challenges as most business (even those using software which can submit VAT returns electronically), choose to use HMRC’s basic tools for their VAT returns.

MTD requirements will not now kick in for other taxes until at least 2020. Businesses below the VAT threshold won’t need to keep digital records or provide quarterly updates for other taxes until then.

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How to choose an Umbrella Company

Off Payroll Working in the Public Sector:

One of the consequences of the Off Payroll Working in the Public sector has been that many contractors working in the public sector via a Limited Company have been obliged to move into Umbrella companies. The alternative- to receive payment after various deductions within a so-called Deemed Payment calculation has been rejected by almost all contractors.

Indeed, if you are operating a limited company and receiving a Deemed Payment, it is still not clear how that limited company should complete its year-end tax returns or accounts in order to avoid being “double taxed” on their earnings.

How an Umbrella Company operates:

The supply chain of client, recruitment agency, Umbrella Company and contractor looks like this: follows:

How an Umbrella Company Operates

Clauses to look for in an Umbrella arrangement:

1 Contractors should be employed by the Umbrella Company under an over-arching Contract of Employment
2 The contract must contain a guaranteed minimum number of hours (usually 336 hours in a 12 month period).
3 The contract must contain a continued mutuality of obligation and a continuity of employment.
4 The contract worker should be entitled to SSP 
5 Travel and Subsistence costs are allowed ONLY if a Supervision, Direction and Control test is applied
6 As an employer, the Umbrella company will submit PAYE and National Insurance deductions to HMRC monthly (a worker can check these have been paid by accessing their own personal HMRC account)
7 Contractors must be paid at least the National Minimum Wage (NWM) and expenses reimbursed cannot take the rate of pay below this

How to validate whether an Umbrella company is compliant:

All Umbrella companies claim to be “compliant” but a few rudimentary checks can confirm whether this is the case- checking a VAT number or that you are paying into a UK bank account does not demonstrate that a company is “compliant”. Many Umbrella companies masquerading as “compliant” are actually fronts for offshore loan arrangements where no income tax payments are being made on behalf of the contractor. Recommended checks would be:

  • Review a contractor’s payslip and analyse the breakdown of their payments
  • Ask a contractor to activate their personal tax account at HMRC and check that monthly payments are being made by the Umbrella company
  • Searches of contractor sites may help you identify Umbrella companies which are perhaps best avoided.

The message is: “beware and be cynical”

My Digital Accounts 6.1 Updates

Here’s a summary of our new update that is now live across My Digital Accounts!

These features are in the new release of My Digital Accounts: 6.1

The main update to our software is our new Data Fluidity.

Data Fluidity:

This new feature allows finalised expenses and invoices to be amended or removed.

If the invoices have already been paid, they can also be unmatched from the bank transaction.

Editing Invoices:

In the new My Digital Accounts software 6.1 you can amend an invoice even after it’s been finalised.

To do this you select the view icon and then edit each detail you need to amend.

You are now able to edit any of the invoice details except from the invoice number.

Follow the same method for expenses


(Full step to step guide on how in the My Digital Accounts training guide).


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