The digital shift is coming
Making Tax Digital (MTD) is the new digital system being introduced to reform UK tax compliance. This is a major change affecting taxpayers in business, including those who have rental income, and will be compulsory.
MTD is a key part of the Government’s plans to make it easier for individuals and businesses to keep on top of their tax affairs and help reduce errors. Keeping digital records and providing updates to HM Revenue & Customs (HMRC) directly should help reduce errors, cost, uncertainty and worry.
HMRC have stated their four foundations for Making Tax Digital:
- Better use of information – digital tax accounts will mean customers can see the information HMRC holds and can ensure their details are complete and correct.
- Tax in real time – you will no longer need to wait until the end the year to find out how much tax you owe, which should prevent payments building up.
- One single financial account – by 2020, customers should be able to see a comprehensive financial picture of their digital account.
- Interacting digitally with customers – customers and their agents (such as MHA Carpenter Box) will be able to interact with HMRC digitally, with a personalised picture of their tax affairs.
Making Tax Digital for Businesses – VAT
Making Tax Digital for Businesses will finally arrive on 1 April 2019. From that date, all VAT registered businesses with turnover above the VAT threshold (currently £85,000) will be required to:
- Maintain digital records (for VAT purposes only)
- Provide their VAT information to HMRC using third party commercial software.
This includes sole traders, partnerships, LLPs, companies, charities and landlords. Furthermore, you must still take part in MTD even if your turnover subsequently falls below the VAT threshold.
VAT registered businesses below the threshold can file their VAT information through MTD if they wish. Initially, there will be no change to the filing or payment deadlines, or to the basic information submitted to HMRC.
How we can help
We are already helping many of our clients with their accounting software to become “MTD ready”. We have access to a range of MTD ready software providers that we can provide along with our accounting services. No two businesses are the same, so each business will require a different level of accounting support.
We can tailor our accounting package to meet the needs of your business and we will be happy to meet with you and discuss what assistance you require and provide a quote.
We are urging our clients to consider getting their software in place sooner rather than later. This will allow time to work with the software and get used to the digital approach in advance of needing to meet the MTD obligations.