Making Tax Digital Is Coming
Whilst it has been subject to several delays, the government’s Making Tax Digital (MTD) system is almost upon us. It is intended that it will take effect for VAT registered businesses with turnover above the threshold (currently £85,000) from 1st April 2019. As VAT registered businesses already had to provide information on a quarterly basis, it was felt that this group would be least affected by the more regular reporting required under MTD.
Whilst HMRC state that, while nearly all VAT returns are now filed online, a majority are still entering the figures manually through the Government Gateway rather than filing directly from their accounts software. Under MTD this option will no longer be possible and businesses will be required to use MTD compliant software to submit the figures directly instead. There are spreadsheet-based options available, but these currently require fixed templates and bridging software to submit figures. Those currently using spreadsheets or manual systems will therefore need to change how they keep their records.
Most major accounting software suppliers already have a direct filing facility that is compliant with the MTD requirements. If you are unsure whether your existing software is compliant, a list of programs that HMRC recognise as ready for MTD can be found on their website. (tinyurl.com/ydbwuv3v).
HMRC’s position is that making tax digital will improve business record-keeping and tax position throughout the financial year. The main aspect of this is that your personal and business tax affairs will all be compiled in one place. Other stated advantages are
• You can ensure the details HMRC hold about you are accurate
New digital tax accounts should make it easier to check the information HMRC retains about an individual and their business is 100% correct.
• It will eliminate human error
MTD-compliant tax reporting software will enable HMRC to review your tax information almost immediately. They believe that this will result in a drastic reduction in human error from data input.
• will provide better clarity over your tax liabilities
As the information is updated throughout the year, the digital tax account will give a better idea of the tax liability likely from activity to date.
• It will make contact with HMRC easier
Your new digital tax account should be designed in a way that will enable you to liaise with HMRC easily online via secure messaging and webchats.
Whatever the final result, if you fall within the affected group you should take action now. At the very least, you need to make sure you have MTD-compliant software and know how to use it. Having been aware of MTD for some time, most accountants should be in a position to help you if required.
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