Making Tax Digital (MTD) – what do you need to know now?
Making Tax Digital (MTD) represents a complete change to the UK tax system, affecting VAT-registered businesses initially and then going on to impact on every UK tax payer.
This has an immediate effect on some of our clients – but eventually, as HMRC develops its plans, it will affect every tax payer we act for. It’s still very much at the early stages as HMRC is working out how to ensure that the estimated £4bn per year in lost taxes is significantly reduced.
So, for busineses with a turnover above £85,000 per year, MTD requires all VAT registered businesses to submit their information electronically, using MTD compatible software, from April 2019. This applies to all organisations, not just corporate bodies. Many companies already submit their returns online but from April 2019, businesses will need to send their information directly from their accounting software or via ‘bridging’ software. There will also be a much more detailed breakdown of VAT catergories required per return. This all means that businesses that still keep manual records will have to change to computerised.
Remember, these rules will only apply to VAT-registered businesses, with £85,000+ turnover (for now).
There is much to learn on the subject of MTD but we do understand that there are a few entry points to using the system. You may ask to use HMRC’s trial system that is now in operation. You must have a link between HMRC and your accounting records by 1st April 2018. You may take advantage of the promise by HMRC that there will no financial penalties as the system settles down between 1st April 2019 and 1st March 2020.
Doubtless there will be more to discover and we will be keeping up to date with everything HMRC proposes. Talk to us if you need to know more.
You can also read a full article in Accountancy Daily that we found useful (Source: accountancydaily.co, April 2018).