The Government has set out its vision for a transformed tax system so as to be more effective, more efficient and simpler for taxpayers. This planned transformation is known as Making Tax Digital (MTD). Businesses and landlords will be required to use commercial software to maintain their records and to update HMRC quarterly, starting with VAT.
The original MTD proposals were to be phased in from April 2018, however the Government announced in July 2017 that this was to be delayed by 12 months to April 2019. The first phase is to use MTD to meet VAT obligations only and will apply to businesses who are VAT registered with turnover over the VAT threshold (currently £85,000). Below is the latest timeline for MTD
- April 2019: MTD for VAT will apply to VAT registered businesses with turnover above the VAT threshold. This includes unincorporated businesses, companies, LLPs, and charities. Businesses registered for VAT but with turnover below the VAT threshold can opt in and file their VAT information via MTD if they wish.
- April 2019: All businesses may try MTD on a voluntary basis
- April 2020: Non-VAT registered unincorporated business and landlords join MTD
- April 2020+: Companies and Large Partnerships to join MTD (HMRC to confirm)
MTD is intended to provide a more modern, digital service which will hopefully help businesses get their taxes right, with the use of technology making it easier for them to do so. From April 2019, you are required to:
- Keep your records digitally (only for VAT purposes at present)
- Submit your VAT return information to HMRC through MTD compatible software
HMRC expect that the digitalisation of this process will help eliminate errors and will result in more timely and accurate record keeping. It will also ensure that businesses record-keeping will be in real time, giving business owners more useful up-to-date information.
The use of MTD compatible software would make the transition over to MTD as straightforward as possible for you and your business. There are a number of options available in terms of software, with most businesses now opting for cloud accounting software such as Sage One, Quickbooks, Zoho Books, Xero etc. Desktop based software such as Sage 50 Accounts and Quickbooks pro will also be made MTD compatible.
Please contact us for further information and prices for software. We can also offer a bookkeeping service at competitive prices if MTD is something you would prefer to outsource.