Making Tax Digital
What is Making Tax Digital?
Making Tax Digital (MTD) has been introduced as a key part of the government’s plans to make it easier for individuals and businesses to get their tax right and keep on top of their affairs. It will revolutionise the way that accounts are submitted in a new prescribed format and how data is sent to HM Revenue & Customs (HMRC). MTD will transform the way the tax system works so that it is more effective, efficient and easier for tax payers to use.
How will MTD affect me and my business?
The first stage of HMRC’s MTD programme focuses on VAT and means that businesses will be encouraged to maintain accounting records digitally on a MTD approved software and submit VAT returns through this software.
We are certified with several different software providers including Xero, Sage and Quickbooks so we can advise you on the package that would best fit your needs and budget.
When will MTD affect me and my business?
If you are a VAT registered business with turnover over £85,000 you will need to use MTD approved software to submit your VAT return from April 2019.
A six month deferral will apply to around 3.5% of businesses who fall into one of the following categories:
- ‘not for profit’ organisations that are not companies (this includes some charities)
- VAT divisions and VAT groups
- public sector entities that are required to provide additional information alongside their VAT return (such as Government departments and NHS Trusts)
- local authorities and public corporations
- traders based overseas
- those required to make payments on account
- annual accounting scheme users.
These groups fall into MTD from 1 October 2019.
Eventually MTD for VAT may be extended to all VAT registered businesses, but this will not happen before April 2020.
Can I still use spreadsheets?
If you currently use spreadsheets to record accounting transactions, then MTD ‘Bridging Software’ will be required. Spreadsheets alone are not a free way to comply with MTD for VAT requirements.
How does HMRC plan to enforce MTD?
HMRC are planning to introduce a points based penalty system to deal with late submissions and payments. Full details have not been announced yet, but a 12 month soft landing is expected before full penalties are enforced.
What should I do now?
If you are a David Allen client we will ensure you meet HMRC’s requirements and fully comply with MTD. If you are not a client please get in touch for a free independent review.
We have put together some tips to help you get digital: 12 steps to MTD – Step 1 to Step 7 watch this space for further updates …