26 Jul Making Tax Digital (Is it coming)?
MTD (Making Tax Digital) is the government’s plan to make it easier for them to get their tax right and keep on top of their tax affairs.
There has been a lot of confusion recently over MTD. Last year it was announced that for taxes other than VAT, MTD will not be mandated until at least April 2020.
It currently looks like MTD for VAT will commence from April 2019 for VAT & April 2020 for income tax. We believe that MTD for VAT will go ahead in April 2019 and income tax will follow depending on how MTD for VAT works for HMRC & businesses.
HMRC have recently released a communication pack which gives more information on the introduction of MTD. VAT registered businesses with a turnover above the VAT threshold (currently £85,000) will need to keep digital VAT records and send in returns using MTD compatible software from April 2019.
HMRC have been talking about the introduction of MTD for the past few years and the main reason is to close the gap between the tax that should be paid and the tax that is actually paid (a gap estimated to be over £9billion each year).
In relation to VAT, from April 2019, any software which prepares a VAT return to send to HMRC must be MTD compatible. Harrisons Accountancy use a range of software packages which will be MTD compliant and most software manufacturers are currently working on ensuring they have some software that is compatible. If you use software from a provider, you may well need to upgrade to a newer version for it to be sufficient. There are no changes to deadlines or payment dates.
In relation to income tax (self-assessment), anyone joining MTD will need to send quarterly summaries of income and expenses to HMRC using MTD-compatible software. The functionality is still being adjusted and will be developed over time. There are no changes to when payments are due, just the way profits are reported to HMRC.
HMRC will not be offering a free version of MTD software so businesses will need to decide on their own software package. We will be supporting clients with any help they require and we will also continue to carry out bookkeeping for clients using our own MTD compatible software packages.
The main point for clients to focus on is that business records need to be kept digitally. Some clients have decided to start keeping their records digitally now so that they’re compliant in advance – if you need any help or guidance, please get in touch.
It will be possible to use spreadsheets but you will need some MTD compatible bridging software. This enables the data to be exchanged from the spreadsheet and sent digitally to HMRC. HMRC will not accept data that is physically types into another software package (it must be submitted from the source).
If you’re interested in being involved with us on the pilot for MTD (either for income tax or VAT), please get in touch. We’re here to support our clients and colleagues on the transition to MTD.
Any questions – let us know!