Making Tax Digital
What is Making Tax Digital (MTD)?
MTD is HMRC’s programme to introduce a digital tax system that 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.
There are three components to MTD for VAT which are:
- Businesses will be required to maintain accounting records digitally in a software product or on excel spreadsheets;
- Taxpayers are to submit their VAT returns using functional API enabled software; and
- Taxpayers must be able to receive information from HMRC via the API platform therefore taxpayers must have their own email address registered with HMRC for this purpose.
How will this affect your business?
If you’re already using cloud accounting, the impact will be minor as companies such as Xero are all set to meet HMRC’s new requirements. But, if you’re using older software or you rely on manual records, you need to act now to prepare for the changes.
How do I prepare for MTD?
Despite concerns in the press about the burden on businesses, there are some positives to MTD – done correctly, it could mean a bit of short term pain for long term gain.
In most cases, we recommend clients use a cloud accounting system such as Xero. It’s cost-effective, allows you to store all of your information in one place and will help you plan and monitor your business finances.
For those with minimal transactions, new software which converts information from spreadsheets into MTD-compliant returns may suffice, although you won’t benefit from the wider time-saving and accuracy improvements cloud accounting will offer. If you’re unsure about the best solution for your business, contact us today for further help and guidance.
"I'm using MTD compliant software - do I need to do anything?"
In short, yes. Although you are using MTD compliant software, you also need to register for MTD take to ensure you are ready to file your first MTD compliant VAT return. By not registering, you may have trouble filing the return using the existing systems, even where digital software is used.
If you submit your own returns, please make sure you register no later than two weeks before your first MTD-compliant return is due - but no sooner than two weeks after the last non-MTD VAT return has been filed to avoid complications with pre-MTD returns.
You will need to register for MTD through your online government gateway account. If you need any help with this, please contact us.
For those businesses where HB&O submits VAT returns on your behalf, we will register you for MTD through our agent portal. This will result in an email being sent to you from HMRC asking you to verify your email address and accept electronic communications. Although we will then set you up for MTD, we would still encourage you to sign up for your own Business Tax Account. If you need help with this, please get in touch.
How can HB&O help?
Our team can advise you on the best solution for your business and help you get ready for making tax digital well ahead of your compliance deadline. We’ll also recommend the best apps to speed up your bookkeeping and move other paper-based systems online.
We are accredited partners of the top cloud accounting software packages including Xero and Sage, and will help you find the right package for you.
For more information contact your normal HB&O adviser or email us on email@example.com.