Making Tax Digital
Making Tax Digital – or MTD – is the UK’s biggest tax shake-up in a generation.
Our highly-trained team can help your business prepare for the digital tax revolution. We’ll explain what it is when it's happening and what it means for you.
MTD is being introduced in stages - VAT first in April 2019, then the rest of your accounts sometime after 2020!
If you file a VAT return, you'll soon be required to do it in an MTD-compliant way. This isn't just about filing your VAT return, as HMRC want all your vat transactions in your VAT account.
From April 2019
Businesses who are VAT registered and have (or have had) a taxable turnover above the VAT threshold (currently £85,000) must keep a digital record of their VAT related finances in MTDcompliant software.
They also have to submit their future VAT returns using MTD-compliant software. They'll no longer be able to log on to HMRC's site to use HMRC's VAT online service to submit VAT returns.
From April 2020
If the launch of MTD for VAT is successful, HMRC may move to the next phase. This would require the remaining VAT registered businesses - those who are voluntarily registered for VAT - to keep digital records of their VAT transactions and submit their VAT returns using MTD-compliant software.
They too will no longer be able to log on to HMRC's site to use HMRC's VAT online service to submit VAT returns.
When to comply
If your VAT-able turnover is £85,000 or higher then MTD rules apply from the beginning of your first VAT period starting on or after April 2019. A VAT period is the inclusive dates covered on your VAT return. If your VAT-able turnover is less than £85,000 then you do not need to comply just yet.
What does it mean to 'keep a digital record'?
- Your digital records must contain your business name, primary business address, VAT registration number and the VAT scheme you're using.
- Your digital records must also show the details of your sales which have had VAT applied. These should include the date of sale, value of the sale (excluding VAT) and the rate of VAT applied.
Will MTD benefit my business?
There are four main benefits of MTD to small businesses:
- Improved quality of record keeping
- Reduced likelihood of error (due to less manual entry)
- More efficient management of business affairs - via better financial reports
- Less time gathering and inputting data
WARNING - The Government is keen to progress on from making VAT digital and plans to make businesses file all their transactions via quarterly accounts and tax returns! This has been delayed until after April 2020, but it's coming.
If you will need to upgrade your bookkeeping systems for this first phase of VAT, you may as well 'kill two birds with one stone' and implement a system that future-proofs you for this development.
So, where do you stand?...
- If we do all of your bookkeeping now then you are covered
- If you use the latest cloud accounting software then you are probably ok too
- If you use desktop software like Sage or your own system you'll probably have to upgrade it or convert to another system
- If you use a paper-based system or spreadsheets then you'll definitely need to modernise.
If you would like to discuss Making Tax Digital and need help preparing for the changes to your accounting systems then give us a call on 01530 833474 or email firstname.lastname@example.org