Making Tax Digital (MTD)

Making Tax Digital is a significant change to the way we file our VAT – but what does it mean for your business? For VAT periods beginning on or after 1 April 2019, most businesses that are VAT registered and make taxable supplies over £85,000 will no longer be able to use HMRC need to file VAT returns using API enabled software.

Only about 10-12% of taxpayers or their agents currently file their VAT using accounting software so with less than 6 months to go, many businesses may not be ready for this big transition. There is also a lack of awareness, as HMRC themselves found in their 2017 survey where only 20% of taxpayers had heard of Making Tax Digital. However, HMRC has now begun writing to VAT registered businesses that it believes should be in MTD.

In order to build awareness and help our clients get ready for these big changes, we have been running seminars on this since April. The seminars help to explain what’s required and options for how to tackle this in your own business. You can watch a recording here.

The options available to you depend on your existing system. If you currently use accounting software you should check what upgrades they are providing as not all software developers are providing a solution for Making Tax Digital. Check also if there are any associated costs.

If you currently use spreadsheets for your accounts then you will need to use bridging software to digitally file your VAT return with HMRC as you will not be able to use the existing portal.

There are a few exemptions to MTD but HMRC will assume you are in unless you notify them of your exemption before your mandatory start date – from 1 April 2019 for most businesses. 

For more complex businesses (VAT groups, Payments on Account clients etc.), the mandatory start date is now from 1 October 2019 (announced 16 October 2018)

Your MTD checklist

 Check whether your software developer has a solution for you
 Check whether you will require additional software to file returns
 Upskill your staff to use the new software
 Join the public HMRC pilot scheme if you want to test the software in advance of the mandatory start
 Back up your data before you upgrade
 If possible try and run the old and the new software in tandem to check that the figures being generated are correct
 Seek advice if unsure

If you need any advice on MTD or would like to talk to us about our bridging software solution, please contact our MTD Guru Ruth Corkin.

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