Making Tax Digital is HMRC’s move to digitise tax. Making Tax Digital (MTD) was first announced by the government in 2015 as an initiative to improve the effectiveness and efficiency of the UK tax system, and reduce its complexity.
As of 1st April 2019, HMRC will require you to submit VAT returns using accounting software, which means you’ll no longer be able to submit manually through the HMRC gateway. Although MTD will eventually cover all tax, it’s being rolled out in phases. The first phase affects those above the VAT threshold of £85,000.
Why is it happening?
HMRC estimates it loses £9bn each year on taxation errors, and they believe that’s partly due to the way businesses declare their income.
The government has also outlined some of the key benefits of the MTD scheme for businesses, including the ability to know where they stand when it comes to tax affairs; being able to access tax information online in one place; being able to work collaboratively with an agent; and being able to plan and budget effectively.
Headline changes
Changes to record keeping – Businesses in scope will no longer be able to keep manual records. Digital records must be maintained in what is defined as ‘functional compatible software’ – broadly, software which can connect to HMRC – and these must capture more information than is currently required to be recorded.
Changes to VAT return submission – VAT returns must be submitted to HMRC from the software, and not by entering VAT return figures onto the HMRC portal.
Voluntary participation
Businesses that are not required to begin keeping digital records for VAT from April 2019 will still be able to participate on a voluntary basis. HMRC has said that it expects many businesses to move to the system in April 2019 even if not required to do so. Companies that are voluntary registered for VAT will no longer be able to use the HMRC portal, and consequently will also need to submit using third party software.
What can you do now to get ready for ‘Making Tax Digital’?
By now, many businesses should have heard about Making Tax Digital. However, whilst there is less than 12 months to go until Making Tax Digital is implemented, many are still uncertain about the requirements and how specifically these requirements will apply to their business.
Here at Sutton McGrath Hartley we can support you through the changes and provide the ongoing services that you need. Due to the fundamental nature of the changes, we will review your current record keeping systems, discuss your requirements, and help you consider what work to do yourself and which activities you wish to be provided. Contact us on 01142664432 or email info@smhca.co.uk.
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