Making Tax Digital

 

What is Making Tax Digital (MTD)?

Making Tax Digital (MTD) is an HMRC initiative designed to make sure the UK tax system is effective, efficient and easier for taxpayers.

Making Tax Digital for business begins on 1st April 2019 with MTD for VAT. From that date, VAT-registered businesses above the threshold of £85,000 will have to keep digital records and submit VAT returns using compatible software.

Why is it happening?

HMRC loses £9bn each year on taxation errors, and they believe that’s partly due to the way businesses declare their income – digital record keeping and automated VAT submissions will make the process easier and error-free.

Part of improving VAT means you’ll need to record your transactions throughout your VAT period and send HMRC an automated nine box VAT return at the end of each period, directly from your software. It’s a simpler, more efficient process that will be less disruptive to your business in the long run.

What it means to you?

Digitising tax is a good thing. You’ll no longer have to provide the same details twice. You’ll get a real-time view of your tax so you’re not taken by surprise when bills come in. Having all of your tax details in the one place makes everything simpler.

Annual turnover

Quarterly tax reports

Timeline

Over £85,000 + VAT registered.

VAT only

01 April 2019

 

Over £85,000:  all businesses/landlords

Income tax and national insurance (NI)

01 April 2020

£10,000 to £85,000

Income tax and NI

01 April 2020

All companies

Corporation tax

01 April 2020

* Or on a voluntary basis prior to April 2020.

The annual turnover of £85,000 above is based on the current VAT threshold.

Exemptions

There are exemptions, but for most businesses with turnover above £85,000 per annum and are VAT registered you will need to start planning for Digital Tax now. Those businesses with turnover under £85,000 per annum and not VAT registered will need to be compliant by 2020.

Software requirements

This functional compatible software must be able to:

  • Make and keep records in a digital form.
  • Preserve records in a digital form for up to six years.
  • Create a VAT return from the digital records and provide HMRC with that information digitally.
  • Receive information from HMRC via its API platform.

Costs

Businesses that don’t currently use software will need to buy software (and possibly hardware) to be MTD compatible. Other businesses will need to upgrade or develop bespoke systems. Businesses may also require further help from their agent, or additional internal resource, at least initially to transition to digital records, and create the digital flow of data to HMRC.

For more information on how we can help, please click here to be directed to our Digital Accounts page.

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