Making Tax Digital (MTD)
What is Making Tax Digital (MTD)?
Making Tax Digital or MTD, is part of the government's wider plans to digitalise the UK tax system, by asking all UK businesses to keep digital records via approved software and submit tax updates to HMRC on a quarterly basis.
What is the timeline for MTD?
MTD was first announced in 2015. Since this time the systems for submitting VAT returns digitally to HMRC have been in development and private testing of the system is currently being undertaken. HMRC plans to provide a wider, 'open' pilot in the coming months with mandatory MTD for VAT launching in April 2019. VAT registered business with a turnover below the VAT threshold will not be mandated to submit their returns this way until at least 2020.
What does this mean for my small business?
This means that all small businesses who have a turnover above the VAT registration threshold (currently £85,000), will be required to use an approved, MTD compatible software for all of their accounting records.
What do I have to do to prepare?
Firstly - do not panic! The main consideration for small businesses is to think about how you're currently keep your accounting records? Are you still using a paper ledger, is your record keeping sporadic? If the answer is 'yes'; you need to start thinking about changing over to a digital, cloud based software that is MTD approved by HMRC and also hiring someone to help out with your bookkeeping.
Which MTD cloud software solution should I use?
At present, if you visit the MTD software supplier page on the GOV.UK website you will be greeted by a huge list of 4 suppliers you may or may not ever have heard of - Absolute, Forbes, IRIS and Rhino. Of the four the most familiar to you is no doubt IRIS; parent company and developer of Kashflow accounting software.
Please bear in mind that your current software provider may not be moving forward with MTD so it's important to ask this question now. For users of VT Software, who have confirmed that they will not be moving forward with development for MTD, so this will mean migrating to a new software supplier.
How soon should I start preparing for MTD?
As soon as possible! Migration and learning new systems take time and before you know it April 2019 will be upon us. Eligible businesses with a HMRC Agent can also register to take part in the ongoing pilot scheme; this applies to sole traders with income from one business or landlords with properties (excl. furnished holiday lets).
Is there anything else I should know?
What else is planned?
MTD for Income Tax is also in the pipeline, with businesses able to sign up voluntarily to submit their self assessment tax returns to HMRC. This will become mandatory from 2020 at the earliest, with development previously pushed back to allow HMRC to concentrate on planning for Brexit.
Where can I find more information?
HMRC has a number of other resources available for businesses who would like to find out more about the MTD changes, this information can be found here.
Ask an Agent
As HMRC Agents, we can also help. We can provide advice and guidance, assist with new software and help with migration from old software to new, as well as introduce you to the MTD pilot scheme, should you wish.
If you would like a review of your businesses current MTD position, please do not hesitate to contact us fora no obligation consultation on 01395 320316.