Making Tax Digital

Increasingly, businesses and agents see the benefits of digitisation. Millions of businesses are already banking, paying bills and interacting with their customers or suppliers online, and many are already using accounting software.

HMRC’s ambition is to become one of the most digitally advanced tax administrations in the world and MTD is making fundamental changes to the way the tax system works – transforming tax administration so that it is:

• more effective

• more efficient

• easier for taxpayers to get their tax right

The move to digital integration will eliminate many of the existing paper-based processes, allowing businesses and their agents to devote more time and attention to maximising business opportunities, encouraging growth and fostering good financial planning.

Many businesses use an agent and MTD will allow agents to continue to provide a full service in supporting their clients.

Ask me about how I can help your VAT registered business through this process, read more about MTD in HMRC’s website.

From 1 April 2019, all VAT-registered businesses with a taxable turnover above the VAT threshold (£85,000) are required to keep their VAT business records digitally and send their VAT returns using MTD-compatible software. The only exception to this is for a small minority of businesses for which we are deferring mandation to ensure there is sufficient time for testing the service with them in the pilot before they are mandated to join from 1 October 2019.

If after then, the business’s VAT taxable turnover subsequently falls below the VAT registration threshold, mandation still applies unless the business deregisters from VAT or meets one of the other exception criteria, such as insolvency.

The deadlines for sending VAT returns and making payments are not changing.

Businesses will need to use software to keep their business records digitally. This may include dedicated record-keeping software or a combination of software packages or spreadsheets.

From April 2019, software that prepares a VAT return to send to HMRC must be MTD-compatible for those mandated to use MTD from this date. This means that it can integrate with HMRC systems to send VAT returns to HMRC. From April 2020, data must be exchanged digitally between all software used by a business for VAT. The information contained with the MTD VAT return will be generated by pulling information from the digital records. This information will be the 9 boxes required for the VAT return.

In the case of spreadsheets, this means that the software must be capable of taking the relevant information from the spreadsheet electronically and sending it to HMRC.