An update on Making Tax Digital
We updated you back in July following the announcement that Making Tax Digital (MTD) is to be delayed until April 2019.
However it is very clear that MTD will not be going away and now is a good time to start getting your business accounts ready.
Every individual and business now has access to their own personalised digital tax account and these are being regularly expanded and improved. HMRC’s ambition is to become one of the most digitally advanced tax administrations in the world, modernising the tax system to make it more effective, more efficient and easier for customers to comply.
What is Making Tax Digital?
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 – meaning the end of the annual tax return for millions.
Who is affected first?
From April 2019, MTD will be enforced for VAT registered businesses with a turnover above the threshold, for VAT registration which is currently £85k. There will be no other roll out, in terms of Income tax, before April 2020. However, for those that want to be proactive, HMRC began accepting unincorporated businesses and landlords into a MTD pilot scheme for Income tax last summer.
Deadlines for VAT submission to HMRC will not change, for example, businesses with a VAT quarter ending 31 March will be required to submit their return by 7 May.
Businesses qualifying for MTD with a year end of 31 March will be required to prepare and submit their VAT returns from 1 April 2019, using the MTD format.
How do I comply?
VAT records will need to be prepared and submitted on MTD approved software or spreadsheets in conjunction with other software, for submission, in order to meet full MTD requirements.
Free software may be provided by HMRC, however businesses will need to contact their software providers to ensure that the software they are currently using will be MTD compatible by April 2019.
For businesses that are voluntarily registered for VAT with a turnover below the VAT threshold, they will continue to have access to the HMRC portal to submit their VAT returns and have the option of not complying with MTD for VAT purposes from April 2019.
If you’re considering changing your accounting software or currently use a manual system you will need to check your chosen method will meet MTD requirements.
We work with a number of different accounting software from Xero, to Quick Books and Sage. If you want to know more about Making Tax Digital and how it will affect you, get in touch with our Tax team on 0161 249 5040.