MTD: Make Tax Digital
Why Make Tax Digital?
In a bid to make the process of paying taxes more accessible and efficient the Government announced their ‘Making Tax Digital’ initiative as part of their 2015 Autumn Statement.
This announcement also outlined their plans to ‘transform’ the tax system and scrap tax returns by 2020.
Although unprecedented in the UK, digital tax systems have already been effectively implemented in countries such as Australia, Brazil and Estonia.
There are plenty of benefits to digital record-keeping, for instance taxpayers using an online tax account are able to get a clearer picture of their tax affairs in real time. Digital tax management also reduces hassle, making it possible for anybody with internet access to remotely monitor their taxes. The web based service allows business owners to budget more accurately and save time by placing all of their taxes in one place.
In April 2019, Making Tax Digital will become a reality for all businesses with a turnover above the £85,000 VAT threshold.
So what does it actually mean?
Well it means you have to submit a summary of your income and expenditure every quarter to HMRC. And you will only be able to do it via software. HMRC have listed which software is currently MTD compliant so make sure you do your research before signing up to something.
VAT-registered businesses with a taxable turnover above the VAT threshold are required to use the Making Tax Digital service to keep records digitally and use software to submit their VAT returns from 1 April 2019.
The exception to this is a small minority of VAT-registered businesses with more complex requirements. As part of planning for the VAT pilot, HMRC continued to engage with stakeholders and listen to their concerns about business readiness for Making Tax Digital. We have made the decision to delay mandation for these customers until 1 October 2019 to ensure there is sufficient time to test the service with them in the pilot before they are mandated to join - see the timeline below:
Making Tax Digital mandated for all customers (except those that have been deferred).
Making Tax Digital mandated for customers that have been deferred. The 6-month deferral applies to customers who fall into one of the following categories: trusts, ‘not for profit’ organisations that are not set up required to provide additional information on their VAT return (Government departments, NHS Trusts), local authorities, public corporations, traders based overseas, those required to make payments on account and annual accounting scheme users.
Given that you will be learning a new software AND faced with having to submit your data on a quarterly basis (or face penalties) we at Seed ensure all our clients are up and running on software that is MTD-compliant so that when the launch date arrives, the process will be a walk in the park.
If you want to know more about how we can help you and your business, schedule a call today.