What is it and what do you need to know?
Despite rumours that the date may change, it has been confirmed that the government’s new regime of Making Tax Digital comes into force on 1 April 2019.
In brief, this means that almost every business currently operating above the VAT threshold of £85,000 will have to be MTD ready. Through our series of articles we will explain what it means, how you can ensure you are ready and what you need. We’ve taken some time to understand and work with this new concept so we are here to support you as you become fully compliant and comfortable with it. You may also prefer some of the outcomes of reporting in this way.
MTD is a key part of the government’s plans to make it easier for businesses to get their tax right and keep on top of their tax affairs. HMRC’s ambition is to be one of the most digitally-advanced tax administrations in the world, modernising the tax system to make it more effective, more efficient and easier for customers to comply.
Eventually all businesses will be subject to MTD but for now the government is starting with getting VAT completely online. For businesses under the VAT threshold, they may sign up voluntarily. There are a small number of exempt businesses such as trusts, not-for-profit organisations, local authorities and others. We can advise you if you’re unsure.
Basically, businesses will have to keep their records digitally from the start of their accounting period. As most businesses will already be doing this, it’s important that you check your provider’s plans for ensuring the software is MTD compatible. You’ll need to be able to send and receive information via HMRC’s MTD systems so you will need to prepare for this. It’s important to know that your data can’t be transferred or typed into another system for MTD purposes – the HMRC plan is that you use the accounting software that is already part of your daily business.
Keeping digital records and providing updates to HMRC directly through MTD-compatible software will help reduce errors, cost, uncertainty and worry. This streamlined digital experience will integrate tax into day-to-day business record-keeping, so that businesses can view their tax position in-year and be confident that they have got their taxes right.
MTD comes into effect on 1st April 2019. This is a legal requirement.
For now, MTD is relevant only to businesses who are operating above the £85,000 VAT threshold.
You will need to keep digital records in a format that can be sent to HMRC.
Other taxes will be included in MTD in the future, potentially 2020
The complete set of digital records don’t all have to held be in one place or program but there must be a digital link between the pieces of software used.
We will provide more information on how you can work with this new regime over the coming weeks.