Making Tax Digital
What is MTD?
Making Tax Digital (MTD) is helping HMRC achieve their stated ambition of becoming a world leader in digital tax administration. As well as, making sure the UK tax system is effective, efficient and easier for taxpayers.
MTD for VAT is the first major step in that ambition. From 1 April 2019, VAT-registered businesses above the threshold of £85,000 will have to keep digital records. As well as submit their VAT returns using MTD-compatible software . The VAT Rules will not change under MTD, it is how the information is sent to HMRC that will change.
MTD will be extended to other taxes, such as income and corporation tax from April 2020, so early adoption of MTD is worth considering.
How it affects Business
Making Tax Digital can be seen as another compliance obligation, in our opinion it shouldn’t be. MTD provides a great opportunity and reason to review, and if necessary make your current accounting and business systems fit for purpose. Software, such as Xero makes record keeping more efficient, processes and systems can be automated and streamlined, more financial insight is gained into your business, and also your business will be MTD compliant.
MTD for VAT
From 1 April 2019, all VAT-registered businesses with turnover above the VAT threshold, currently £85,000 must maintain digital records and submit their VAT returns to HMRC through online accounting software, such as Xero. If your business is below the threshold then you can still continue to use the HMRC online portal, the digital requirements will be compulsory from April 2020 onwards.
Records: Digital or paper
HMRC has confirmed the requirements to keep digital records, we can continue to maintain paper documents if we prefer. However, we must keep certain information, for example, VAT-related transactions, such as customer and supplier invoices in digital form.
There will be an automatic exemption from MTD for VAT for businesses which are registered for VAT but have turnover below the threshold of £85,000. However, businesses can still choose to keep records digitally and submit VAT information under Making Tax Digital.
If your business is over the £85,000 VAT threshold, then you’ll need to use compliant software, like Xero, by April 2019 at the latest.
If you’re using software that is not MTD for VAT compliant, you have two options:
• Move to MTD for VAT-compliant software.
• Use a bridging software product to submit your MTD for VAT return for you.
Thanks for reading this blog and watching our video- we hope they’ve helped.
Contact Us: 0116 2247122 if you think we can help you and your business