Making Tax Digital

 

Making Tax Digital (MTD) will see most businesses move to quarterly online reporting, beginning with VAT returns for VAT-registered businesses whose turnover exceeds the registration threshold from April 2019.  While those operating below the VAT threshold now have more time to prepare, MTD puts a clear emphasis on moving all businesses towards electronic reporting by 2020. Our team is here to help you become digital tax ready.

What is MTD?

MTD is HMRC’s programme to introduce a digital tax system. MTD will require most businesses, self-employed people and landlords to use digital software to keep tax records and update HMRC on a quarterly basis. 

Digital tax accounts will enable us to see all our tax information in one place, with some information being sourced directly from banks and other third parties.

Businesses with a turnover above the VAT threshold will be required to keep digital records for VAT purposes (and only VAT) from 2019. These records will need to be submitted using MTD compliant software. VAT registered businesses are already used to filing quarterly returns, and for those using cloud accounting systems, the impact of MTD is expected to be relatively small. But for those businesses managing their finances on spreadsheets, or those with complex VAT arrangements, MTD is likely to require some significant changes, which could have financial implications.

Following delays to the original timescale, businesses and landlords will not be required to keep digital records, and update HMRC quarterly, for other taxes until at least 2020.

However, we urge all businesses to start planning now for the move to digital records so they are well prepared in advance of the different phases of the programme.

What does MTD VAT mean for your business?

From April 2019, those in MTD for VAT will be required to keep records in a digital format.  The VAT return will need to be calculated and submitted by using one of the following options:

  • Commercial software; or
  • Application Programme Interface (API) bridging software; or
  • API enabled Excel spreadsheets. 

Contact our team for advice on the best solution for your business to ensure you’re compliant ahead of the MTD VAT deadline.

MTD beyond April 2019 and what it means for other taxes

While the end of the annual tax return sounds good, the reporting burden is ultimately likely to increase. Quarterly reporting means businesses need to be up to date with their records and ensure payroll, auto enrolment and VAT reporting is timely and accurate.

The first step is to consider switching to cloud accounting. While this isn't mandatory, there are many additional benefits associated with using cloud accounting which will also make it easier to comply with MTD in the long term. If you’re not already using cloud software, our team can advise you on the best solution for your business. We’ll also recommend the best apps to speed up your bookkeeping and move your paper-based systems online.

How HB&O can help

As your digital tax agent, we’ll be keeping on top of the latest MTD developments and can support you every step of the way, including:

  • Linking your digital tax account to your cloud software
  • Monitoring the accuracy of information
  • Preparing and submitting your quarterly reports
  • Dealing with HMRC real time queries
  • Providing ongoing tax planning advice 

Did you know, we are accredited partners of the top cloud accounting software packages including Xero and Sage? 

For more information on Making Tax Digital, read our feature in The Bottom Line