MTD for businesses
Making Tax Digital (MTD) came into force on 1 April 2019 for most VAT-registered businesses with a turnover above the VAT threshold (currently £85,000). The new rules will require affected VAT registered businesses to keep digital records for VAT purposes and file VAT returns using suitable commercial software.
The VAT testing phase opened to businesses in October 2018, which allowed any business that met certain eligibility criteria to sign up in advance of the mandatory adaptation date of 1 April 2019.
MTD for individuals
HMRC has not planned to introduce making tax digital for other taxes – primarily income tax and corporation tax – until April 2021 at the earliest, pending further government announcements.
However, HMRC have already introduced voluntary Making Tax Digital submissions for income tax for single-business sole traders and landlords (excluding furnished holiday lets) as part of a pilot programme.
HMRC has stated in VAT Notice 700/22 that there are exemptions for some organisations subject to insolvency procedures, based on religious beliefs, and those who because of reasons of age, disability, remoteness of location or “any other reason” that mean it’s not “reasonably practicable” for the business owner to use digital tools to keep business records or submit returns.
Preparing for MTD
The new MTD rules mean that filing direct via the HMRC gateway will no longer be an option for those that fall into scope for MTD for VAT and software must be used instead.
Choosing software for MTD compliance will depend on the organisations’ existing level of technology adoption and business needs. An organisation that makes use of very little technology can continue to use spreadsheets provided that VAT returns are filed through a bridging software product which will be able to extract the contents of a spreadsheet and upload it to HMRC.
Organisations should not only consider how to keep compliant with the minimum statutory requirements but also how the fast rate of change in technology will make them remain competitive in the future. As a result, many organisations are investing in more comprehensive software hosted in the cloud and accessible via the internet such as FreeAgent or Xero.
The Making Tax Digital reform indicates strongly that the world is becoming ever more integrated with technology, and HMRC are so implementing new rules to force businesses move towards digital records keeping.
How our team can help?
Our team at Chart Accountancy have been utilising cloud technology for many years which in addition to our expert accounting services means that we are ideally placed to help our clients and prepare them for the MTD reforms. To discuss how the MTD rules may affect you and your business, please contact us.
Speak to us
If you would like to know more about Making Tax Digital, do not hesitate to get in touch with our team. We have years of experience in accounting for contractors, freelancers and small businesses so whatever your query – we are here to help.
To speak to a member of our team call us on 0333 772 7753 or email our team at firstname.lastname@example.org and we will be in touch as soon as possible.