Making Tax Digital is 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.
HMRC’s ambition is to become one of the most digitally advanced tax administrations in the world. Making Tax Digital is making fundamental changes to the way the tax system works – transforming tax administration so that it is:
- more effective
- more efficient
- easier for taxpayers to get their tax right
If you are a UK VAT registered business, from April 2019 you will need to have the right software to file your VAT return. Taking the totals from your spreadsheet or bookkeeping package and entering them into your online VAT return is not acceptable for VAT periods beginning on or after 1st April 2019. So, if your VAT period starts on the 1st April 2019, the return for that period (due by the end of the first week of August) MUST be made digitally using software that is compliant with HMRC requirements
You will need to record your tax affairs digitally using online software or an app, and you or your accountant then send electronic quarterly information to HMRC.
Businesses and organisations will be required to use a functional compatible software product to submit their returns to HMRC. The software will use HMRC’s API (Application Program Interfaces) platform to submit information to HMRC. The current HMRC online tax return services will be withdrawn for those within the scope of the ‘MTD’ rules. You can see a list of compatible software products on the .GOV website https://www.tax.service.gov.uk/making-tax-digital-software
The elements of this transition which may carry a cost to your business are:
- Time spent training on new digital tools and quarterly submission of information.
- Purchasing or upgrading existing software or purchase of apps
- Some businesses may need to purchase new hardware or upgrade existing hardware.
- Additional accountancy/agents’ costs.
MTD doesn’t just apply to VAT, it will be extended to income tax. This has not as yet got a timeframe, the ministerial statement of 13 July 2017 stated that ‘The Government will not widen the scope of MTD beyond VAT before the system has been shown to work well, and not before April 2020 at the earliest.’
There may be scope for businesses currently using spreadsheets for record keeping and accounting to upgrade their processes and become MTD compliant; to submit information to HMRC they will need to acquire a software product from a commercial supplier to provide the link with HMRC systems
So, for the time being, it is just VAT – but that means everybody. There are exemptions, but they are the same as those currently in force for online filing of VAT returns, so if you file online now, you have to become MTD compliant. Quickly.
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