Making Tax Digital (MTD) is the implementation of a fully digitalised tax system. The primary aim of MTD is to make tax administration more efficient, whilst reducing HMRC’s overheads for managing tax affairs. The changes apply to a wide range of taxpayers including businesses, landlords and self-employed professionals.
What’s changing for businesses?
By April 2019, all VAT registered businesses with turnover above the VAT threshold (£85,000) will be required to maintain digital records and send their VAT information using third party software.
MTD is different to the existing HMRC portal you will currently be using to file your VAT returns. It will provide a digital link from your accounting records to your VAT return.
If you currently compile your VAT return either partially or completely using spreadsheets, you will still be able to do this. However there must be a digital link between your spreadsheet and your VAT return.
All transactions will have to be stored digitally but documents can continue to be stored in paper form.
How do I become compliant with MTD?
MTD will require you to use third party software to complete your tax returns. HMRC are running a small pilot, in which we will be taking part, but the full system requirements have not been published. HMRC are in discussions with all the major accounting software providers to enable them to adapt their software which will provide the link to enable VAT returns to be filed. We will provide more information after the HMRC pilot has been completed.
What about income tax and corporation tax?
This will not change before 1st April 2020 at the earliest. When this is implemented businesses and landlords will have to submit quarterly accounting information to HMRC.
Are you ready for Making Tax Digital?
With now less than a year to go, businesses should be making sure they are ready for MTD. If you have any questions about MTD please give us a call. We have a specialist MTD team who will be issuing more information as it becomes available.