HMRC Making Tax Digital (MTD)

What is Making Tax Digital (MTD)

Making Tax Digital (MTD) is the Governments’ plan to digitalise the UK tax system. Businesses and landlords will be required to use commercial accounting software to maintain their records and to update HM Revenue and Customs (HMRC) quarterly with accounts information.

When Does it Start

i) From April 2019: VAT reporting by all VAT registered businesses above the VAT threshold.

ii) From April 2020, at the earliest: All other taxes

Making Tax Digital for VAT

MTD for VAT starts on 1 April 2019 and is compulsory for all VAT registered organisations with a turnover above the current VAT registration of £85,000. From this date such businesses will be required to keep digital records for VAT purposes and submit their VAT return using software compatible with the MTD regulations; the information will be extracted from the digital records to populate the VAT return.

What are the Exemptions?

Exemptions from this obligation are extremely limited and will apply to those businesses that are unable to use electronic communications because of religious reasons or due to a factor such as age, disability or location (e.g. no availability of broadband).

VAT registered businesses with a turnover of less than the VAT threshold (i.e. voluntarily registered) will initially be exempt from MTD for VAT reporting but this exemption may be removed from April 2020 or later.

HM Revenue and Customs have confirmed that charities will not be exempted from this obligation.

Software requirements and keeping digital records

At this time we understand there will be no free software for MTD for VAT provided by HM Revenue and Customs.

HM Revenue and Customs have reported that VAT MTD requirements can be met by a number of commercial software packages as long as they are digitally linked.

Commercial software must be able to:

  • Keep records in a digital form
  • Preserve digital records in a digital form
  • Create a VAT return from the digital records
  • Provide HM Revenue and Customs with VAT data on a voluntary basis,

The following information must be kept digitally:

  • Business name
  • Address of principle place of business
  • VAT registration number
  • A record of any VAT accounting schemes used
  • Time and value of each supply received, plus the amount of input tax to be recovered
  • Time and value of each supply made and the VAT rate charged

For VAT registered businesses below the MTD threshold HMRC’s online portal will remain available for completion of VAT returns.

How can we help?

At Gibbons we are taking a proactive approach to these changes to ensure businesses are prepared.

We use a number of online accountancy software products including Xero, Sage, Kashflow and Quickbooks. All are quick and easy to use.

MTD is a fundamental change to the way you report Tax and the start date is fast approaching. It is important to get up to speed now and implement the changes in plenty of time.

Gibbons can take the stress and worry out of making these changes and ensure that your business is MTD compliant.

To see how we can help please contact us now.

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