You have probably heard about how Making Tax Digital (MTD) is going live in April – as HMRC is quickly becoming one of the most digitally advanced tax administrations in the World, more individuals and small businesses are getting ready to submit their VAT tax returns using online software from 1 April 2019. So how will MTD affect your business? Read on to find out.
What is Making Tax Digital and how will my tax be processed?
Regular tax returns are being replaced with digital tax accounts that keep the taxpayer’s details in one place, and this account allows the taxpayer to view tax affairs in real time, update information, register for new services, see how their tax is calculated and choose payment options.
In regards to tax records, maintaining paper records will no longer meet the legal requirements in tax legislation – taxpayers will have to maintain accounting records digitally using a software product or spreadsheet.
There are a number of software products that can be used to access HMRC’s Application Program Interfaces platform, known as “MTD compatible software”.
Who has to comply with Making Tax Digital?
If you are a VAT-registered business or organisation with a turnover of more than £85,000, you will have to comply with MTD regulations. If you are a business with a turnover below the threshold of £85,000, you can choose to take part in Making Tax Digital but this is not mandatory.
Who has MTD been delayed for?
In October it was announced that there is currently a 6-month delay in regards to Making Tax Digital for about 40,000 groups and non-resident traders. These businesses fall into the following categories (according to icaew.com):
- Trusts
- ‘Not for profit’ organisations that are not companies (includes some charities)
- VAT divisions
- VAT groups (the deferral applies to the group registration only and not to any group companies that are not covered by the group registration)
- Public sector entities that are required to provide additional information alongside their VAT return (such as Government departments and NHS Trusts)
- Local authorities and public corporations
- Traders based overseas
- Those required to make payments on account
- Annual accounting scheme users
MTD compatible software
As mentioned earlier in the article, there are software products that can be used to process tax digitally and access HMRC’s Application Program Interfaces platform. These will help in making the transition to Making Tax Digital a lot easier for you.
Some of this software is designed for agents and some for businesses and many of the platforms act as Excel bridging software. This means that VAT returns can be completed through entering information into an Excel sheet and the application automatically imports the values into the digital VAT return.
You can find out more on MTD software by visiting gov.uk here.
What are the benefits of MTD?
- Keeping information accurate – digital tax accounts will help you to check that the information HMRC holds about you is 100% correct
- Human error reduced – Making Tax Digital’s new reporting function will allow HMRC to check your tax information almost immediately
- Easier to understand – The fact digital tax accounts are like online banks means that taxpayers will better understand how much tax is owed through their account
- Easier to contact HMRC – it is much easier to contact HMRC via webchats and secure messages
MTD for VAT pilot
If you are a business that meets the criteria for MTD and you are due to start MTD on 1 April 2019, you are now eligible to join the pilot. The pilot is designed to test how MTD works.
The pilot will be open to organisations in the deferral group in Spring this year.
You can read more on the pilot in this article by gov.uk here.
How can J&P Accountants help?
At J&P Accountants we work with small to medium businesses and we believe that Making Tax Digital need not be daunting for your enterprise. At J&P we can:
- Advise you on the MTD process
- Advise on the best types of MTD software
- Help you sign up for MTD
- Submit VAT returns on your behalf
Please do not hesitate to contact us by giving us a call or send us a message today for any help or advice on Making Tax Digital.
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