Making tax digital for corporation tax (MTDfCT) update
- This involves keeping accounting and some other records in digital form using MTD-compatible software, plus making up quarterly online reports of income and expenditure to HMRC.
- The quarterly filing dates will depend on your company’s accounting period.
- You’ll need to submit the figures within a month of the end of each quarter.
- HMRC will respond by providing quarterly estimates of your company’s corporation tax liability.
- The plan is for MTDfCT to be mandatory from April 2026, with a pilot scheme from April 2024.
- It will apply to allUK companies and non-UK resident companies subject to UK CT.
- Even the smallest companies will have to comply, as well as companies such as charities, community amateure sports clubs and societies within the charge to CT.
- Quarterly filing will allow HMRC to track transactions in near real time.
- HMRC will be looking closely at dividends and directors’ loan repayments, the timing of which can be critical to CT liabilities.
At your year end your accountant will need to make the usual adjustments.
Domestic reverse charge
Invoices and VAT returns
If you make supplies covered by the domestic reverse charge, your invoicing will be different from supplies outside the scheme. You must show additional information on these invoices. They must:
- Indicate that the domestic reverse charge applies, and say that your customer is responsible for accounting for the VAT
- Show how much VAT your customer is due to account for. If you don’t know that, you must at least show the rate of VAT applicable; and
- Show your charges without VAT.
The simplest acceptable wording is “Reverse charge: Customer to pay the VAT to HMRC”.
If your return includes sales to which the domestic reverse charge applies, there should be no corresponding entry (output tax) in Box 1. But your return must include the value of the supply in Box 6. If you’ve received a supply, you must account for the domestic reverse charge VAT in the quarter in which your customer billed you. In that case, you show the output tax due on the supply in Box 1. You can reclaim the same amount of VAT (input tax) by including it in Box 4. You must also include the net of VAT value of the purchase in Box 7.
- If you use HMRC-approved bookkeeping software, it will allocate the figures to the right return boxes, but your bookkeeper will need to set the correct VAT in the software to ensure this.
- If you use spreadsheets for your bookkeeping or software not approved by HMRC, you’ll need to make changes to your system to ensure that correct entries are automatically included in the right VAT return boxes.
Home working tax relief
Employees who are working from home will need to make new claims for tax relief for the 2021/22 tax year, HMRC has stated.
From 6 April 2020, employers have been able to pay employees up to £6 a week tax-free to cover additional costs if they have had to work from home.
Employees who have not received the working from home expenses payment direct from their employer can apply to receive the tax relief from HMRC.
HMRC has also confirmed that the £6 per week payment is available in full, even if an employee splits their time between home and the office.
The allowance is to cover tax-deductible additional costs that employees who are required to work from home have incurred, such as heating and lighting the workroom, and business telephone calls.
Last year an online portal was launched that allows employees to claim tax relief for working at home.
See link: GOV.UK