MTD [Part 1] What is ‘Making Tax Digital’?
There are just over 8 weeks before the government’s new regime of Making Tax Digital comes into force on 1 April 2019.
In a nutshell, this means that every business currently operating above the VAT threshold of £85,000 will have to be MTD ready. Through this series we will take it step by step and explain what it means in more detail, how you can ensure you are ready to report digitally and what software you need.
Although the change might seem onerous, there are also benefits to MTD that we’ll highlight too as we progress through the series.
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.HMRC
The government is starting with getting VAT completely online which is why it is starting with VAT registered businesses and entities. For businesses under the VAT threshold, they may sign up voluntarily. And there are a small number of exempt businesses such as trusts, not for profit organisations, local authorities and others. Check with us if you are 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 (more of that in another blog). 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.HMRC
MTD comes into effect on 1st April 2019.
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.
Here at The Chartwell Practice, we are MTD ready and it’s our aim to make sure all of our clients are too.