What is Making Tax Digital (MTD)?
Making Tax Digital is an initiative set up by HMRC, designed to be the most fundamental change to the administration of the UK tax system for at least 20 years. HMRC believes that Making Tax Digital will result in a tax administration that will be more effective, and efficient, as well as being easier for taxpayers to submit their income and expenditures correctly.
By moving to digital integration, HMRC can eliminate existing paper-based processes. This will streamline actions, allowing businesses to devote more time and attention to maximising business opportunities – as well as HMRC assisting said businesses with better financial planning.
Reducing costly mistakes.
Based on the latest tax gap figures (2016 to 2017), HMRC believe that Making Tax Digital will also save the Exchequer over £9 billion a year in losses due to tax errors/mistakes by ensuring improved accuracy which digital records generally provide. To ensure this, most software products will have built-in assistance. As the information will be sent directly to HMRC from digital records, thereby avoiding transposition errors, there should also be a reduction in the amount of tax lost to avoidable errors.
When does it start?
The first stage of Making Tax Digital goes live from the 1st April 2019 and will be applicable for all VAT registered businesses (with a taxable turnover of £85k or more). Businesses under this threshold will be exempt until further notice, unless they choose to opt-in to MTD ahead of their deadline. MTD for income tax and corporation tax will also be introduced at a later date.
Currently, only the deadline for VAT registered businesses has been announced by HMRC, however, it is the intention that all businesses and landlords will have to comply with this legislation, unless exempt, in due course.
What you need to know about Making Tax Digital
Paper records – As paper records will no longer be sufficient, it will become mandatory for almost all businesses and landlords (self-employed, partnerships and limited companies) to use software or a spreadsheet to keep accounting records.
Quarterly reporting – There will be a requirement to submit updates to HMRC quarterly, directly from MTD compliant accounting software. This must be submitted within one month before the end of each quarter.
How we can help
At McCabe Ford Williams, we are experts in the leading digital tax software packages and can assist you with the important decision of the best package. We consider options based on your requirements and talk you through the benefits – including how best to implement them – regardless of whether that is a cloud-based solution or not.
To book a free MTD consultation, complete our contact form or call your local McCabe Ford Williams office. For further information visit gov.uk or have a read of our recent blog “Everything you need to know about making tax digital”.