Making Tax Digital (MTD) is a fundamental change to the UK tax system and the route by which HMRC plans to become one of the most advanced tax administrations in the world, modernising the tax system to make it more effective, more efficient and simpler for businesses to use.
MTD is being introduced in phases. The first phase is being introduced in April 2019 for businesses and focuses solely on VAT, mandating VAT registered business and organisations to keep their records digitally and provide returns for their VAT using third-party software compatible with HMRC’s portal.
Who will it affect?
The first phase of MTD affects you if you are VAT registered business or organisation with a taxable turnover over the VAT threshold (currently £85,000). This applies if you are a sole trader, partnership, company, LLP or charity.
VAT registered businesses with a turnover below the registration threshold can opt-in to MTD if they wish.
What do you need to do?
You will need to keep digital records and submit your VAT using compatible software.
If you already have compatible software (see HMRC website for latest compatible software providers) it will deliver the digital information required by HMRC as part of the electronic submission process.
If, however, you are unsure whether your software is compatible, or are unsure how to enter the information or how to set up the link with HMRC, you can either contact your software provider directly or if you prefer, we can help.
Equally, if you currently prepare your VAT returns by hand or on computer spreadsheets and do not have relevant software we can help.
What are the benefits of MTD?
You will have real-time access to more detailed tax information in a single account and have the ability to interact digitally with HMRC. MTD will also save you and your business significant time and reduce errors, helping you to run a more efficient business.
Will the government widen the scope of MTD?
Yes, the intention is to mandate businesses to keep digital records for ALL their finances and that MTD for Business for all taxes, not just VAT will come into effect in the future. However, the Government has committed that it will not widen the scope beyond VAT until the system has been shown to work well, and not before April 2020 at the earliest.
For further help and advice in getting ready for MTD, contact us for a free consultation.