Posts Tagged :

MTD

Translating The Accountancy Jargon | Accountancy Terminology |
Translating the accountancy jargon 758 513 Stepping Stones Accountancy

Translating the accountancy jargon

People usually go into business because they feel that they have something special to offer; a unique skill set or product that the market needs and a desire to offer the very best customer service to complement that offering.

Whether you are gifted at capturing the perfect photograph, capable of building distinct websites or have a unique talent for developing flavour combinations for that favourite of lunchtime foods, the humble sandwich, you are a specialist for a reason and you are no doubt passionate about what you do. However, as business owners there are lots of areas that you are not a specialist in. For example, apart from a web developer few people need to understand what CMS means or apart from a photographer only a small number of people will understand what the use of bokeh is. There are so many business acronyms and technical terms that we will probably never fully understand and perhaps have no need to understand.

If we look at the world of accountancy, how many people really know their accruals from their capital gains or their liabilities from their overheads?  To help you navigate the plethora of phrases commonly used in accountancy, here is an A to Z of some of the most popular ones and what they actually mean:

Accrual – an expenditure that has not yet been paid for or invoiced
Balance Sheet – a summary of the assets and liabilities within the business
Capital Gain – the profit that you make on the sale of asset which is purchased and used within the business (rather than sold on)
Depreciation – the devaluing of an asset purchased within the business
Equity – the value of the business to its shareholders
Fixed cost – a recurring cost that remains the same for a dedicated period of time
Goodwill – the intangible asset associated with the value of a business, e.g.  goodwill, brand recognition, copyrights, trademarks, customers, etc
HMRC – Her Majesty’s Revenue & Customs, the UK’s tax, payments and customs authority
IFRS – the accounting standards set by International Financial Reporting Standards
JSA – job seekers allowance is the money paid to people who are unemployed but that are actively seeking work
Kashflow – one provider of the many solutions for online accounting software
Liabilities – either money or debt which the business owes and results in funds quickly coming out of the business
MTD – a HMRC scheme called Making Tax Digital which is focussed on digitalising the tax system
NI – known as National Insurance which is a payment made by everybody who is employed with a salary over £9,500
Overheads – the fixed costs which do not relate to sales, e.g., rent, fees and depreciation
P45 – a formal document issued to an employee when they leave the company
Quarterly – accountancy processes that need to be completed four times a year e.g., VAT returns and MTD updates
Retained Profit – the sum of all profits when all taxes and dividends have been taken out of the business
Self Assessment Tax Return – personal tax used by HMRC to collect relevant income tax payments
Tax Planning – the process which can be completed to help reduce the burden of large tax payments
UTR – this will be a 10-digit number (known as the Unique Taxpayer Reference) which is given to self-employed professionals for either self-assessment or setting up limited companies
VAT – the tax payments that needs to be made on business purchased (also known as Value Added Tax)
Worker – the newest phrase predominantly used in the ‘gig economy’ for a person’s employment status
Xmas Party Tax Relief – for annual events such as a Christmas party there are tax free benefits as long as the costs is no more than £150 per person
Year End – the closing period of a business’s accounting year
Zero Rate – all goods that are rated zero rate means not VAT is applied to their cost

If you have any questions or unsure about any other accountancy terminology then please call us on 01173 700 079 or e-mail hello@steppingstonesaccountancy.co.uk.

An Update on MTD | Making Tax Digital | Advice on Making Tax Digital | Accountancy Support with MTD | What is MTD
An Update on Making Tax Digital (MTD) 758 513 Stepping Stones Accountancy

An Update on Making Tax Digital (MTD)

Making Tax Digital (MTD) was first introduced during the Spring Budget of 2015, its aim was to completely negate the need for an annual tax return. Instead, taxpayers would have all their information loaded directly onto a digital tax account. Alongside this, businesses would only have to worry about paying one simple business tax. The other key benefit announced was the simplification of tax for self-employed people along with the complete removal of the class 2 national insurance contribution.

Despite lots of discussion and various communications from HMRC, including a number of consultation papers that addressed various aspects of the MTD project, none of these objectives have been met. Indeed, back in July 2017 there was an announcement that the scheme would be delayed with MTD for income tax being introduced in 2020 and MTD for VAT being introduced in 2019.

As planned the MTD for VAT did commence in April 2019 but with the exclusion of specific businesses (classed as complex), who were delayed until October 2019. It was also decided that specific public sector bodies would also not be joining the scheme until sometime in 2022. The final implementation of the scheme will see a compulsory digital transfer on all VAT data to happen by April 2021 and the mandating of all VAT registered businesses to comply with MTD by April 2022.

If we look at income tax, this digitalisation involved a far more complex structure. The result is that a taxpayer will have to adopt four quarterly reports and a final report that in most cases will replace the annual self-assessment return. A pilot scheme for this was initiated in April 2018 however, there are currently only a small number of taxpayers and agents participating in this pilot and also only 6 of the major software companies (compliant with MTD) that have provision for recording this.

Although planned for 2017, the MTD for corporation tax and complex businesses (defined as large partnerships with income of over £20m or mixed partnerships that include companies, LLP’s and individuals) has yet been introduced. The HMRC issued a specific consultation documentation in November 2020 (https://www.gov.uk/government/consultations/making-tax-digital-for-corporation-tax), however this consultation will run until 5th March 2021, so in reality it is likely that developments within this field will not be seen until later this year.

The final item to note on MTD is that the reporting of corporation tax will be very similar to that of income tax rather than VAT. There will be a quarterly reporting structure for both income and costs. Companies will still need to assign all their accounting totals for iXBRL when submitting annual accounts to HMRC. Therefore, companies within MTD will have to submit 5 reports to HMRC for their annual accounts, along with the standard 4 quarterly VAT returns and relevant PAYE returns

    Your Name (required)
    Your Email (required)
    Subject
    Message