MAKING TAX DIGITAL: A guide for businesses
Everything you need to know about MTD
Everything you need to know about MTD
Five facts about Making Tax Digital
Making Tax Digital (MTD) is almost upon us.
From 1st April this year, it will be compulsory for all businesses with a turnover of more than £85,000 to keep digital records for VAT purposes.
Of course, MTD has been piloted amongst half a million businesses over the last year, but we will soon start to see the initiative being rolled out on a more permanent basis.
However, moving the entire UK tax system online is no easy feat, which is why there have been numerous updates issued about its overall aim and progress since it was unveiled by the Government.
Here are five key facts to help bring you up to speed on all things MTD:
Once MTD is in force, you’ll no longer be required to submit your tax returns annually. Instead, you’ll be expected to submit reports every three months from April next year.
Each time you submit a return, you’ll be able to see how much tax you owe, according to HMRC’s calculations. More frequent returns may be another thing to have to think about, but it’ll help make sure you stay on top of your tax affairs all-year round, not just every 12 months.
From April this year, MTD for VAT will apply to all customers, apart from those that have been deferred.
It will then apply to deferred businesses from October this year. Deferred businesses are defined as being trusts, ‘not for profit’ organisations that are not set up as a company, VAT divisions, VAT groups, those public sector entities required to provide additional information on their VAT return (Government departments, NHS Trusts), local authorities, public corporations, traders based overseas, those required to make payments on account and annual accounting scheme users.
It’s anticipated that MTD will be extended to sole traders and businesses with an income of between £10,000 and £85,000 from April 2020.
MTD applies to the vast majority of taxpayers, but not all of them. These businesses include:
As the name suggests, MTD is about making all tax affairs digital. And this involves asking businesses to stop using hard copy accounts and switching to digital ways of working instead.
Originally, the use of spreadsheets wasn’t permitted by HMRC however, certain HMRC-approved spreadsheets are now accepted. The important thing is that they are in a format that can be submitted online.
We’re in the process of implementing a dedicated MTD submissions service for our clients, which we will be rolling out to clients for submitting VAT returns from April this year. In the meantime, feel free to ask us about the service and how it can help make sure that your business is MTD compliant.
As we’ve addressed in points 2 and 3, MTD does apply to most businesses, with the exception of only a small cluster of organisations.
Once in full force, businesses will be accountable for submitting more frequent tax returns and having more regular tax correspondence with HMRC. What was once a while off, is now on the verge of taking effect and what some companies first thought won’t apply to them, most probably will at some point.
If you are uncertain about whether MTD applies to your business and if you’re ready for it, check out this page – https://www.gov.uk/government/publications/making-tax-digital/overview-of-making-tax-digital#next-steps – or get in touch with us via the contact details below.
Making Tax Digital is a key part of the Government’s plans to make it easier for individuals and businesses to get their taxes right and stay on top of their affairs. While the scheme will apply to all businesses above the VAT threshold, smaller businesses will not be required to use it, although they can choose to use it on a voluntary basis.
If you would like to learn more about Making Tax Digital and the impact it’s likely to have on your business, or find out more about our dedicated submissions service, contact Mike Brown, Software Support Manager, on 01905 777600 or MTD@ormerodrutter.co.uk.
This time next year, elements of the Government’s Making Tax Digital scheme will be in the process of being trialled.
It’s envisaged that by April 2018, the scheme, which is aimed at modernising the UK tax system by moving it online, will have started to take effect for VAT payments as part of a pilot test. It’s anticipated that Income Tax will follow after 2020.
From April 2019, it will be compulsory for businesses that are above the VAT threshold to keep their records digitally and provide HMRC with quarterly VAT updates.
As with all major initiatives of this scale, the guidelines surrounding Making Tax Digital are being frequently revised, with new details being released by HMRC on a regular basis. Here’s an overview of the latest updates:
Making Tax Digital is a key part of the Government’s plans to make it easier for individuals and businesses to get their tax right and keep on top of their affairs. While the scheme will apply to all businesses above the VAT threshold, smaller businesses will not be required to use it, although they can choose to use it on a voluntary basis.
For more details about the scheme visit here.
If you would like to discuss the implications of Making Tax Digital or the latest updates on your business or would like more details about the scheme, contact Mike Brown, Software Support Manager, on 01905 777600 or firstname.lastname@example.org.
Making Tax Digital is set to be introduced by the Government in a bid to make it easier for individuals and businesses to get their tax right, as well as stay on top of it.
The regime has been the subject of much debate since it was first announced as part of the Government’s vision to modernise the tax system at the March 2015 Budget.
And it’s recently attracted even more discussion after legislation to implement the initiative was removed from the Finance Bill 2017 ahead of the debate on the bill in the House of Commons on April 25.
The move has led to a flurry of speculation that the scheme will be delayed by at least a year, with some even claiming it could be scrapped altogether. However, Software Support Manager, Mike Brown, says it’s highly unlikely it won’t go ahead.
“While the Government’s actions may have come as a surprise to many, it’s very likely Making Tax Digital won’t be completely cancelled.
“This is merely a delay in implementation, which individuals and businesses should be using to their advantage to ensure they’re fully prepared for the proposed regulations.
“For many businesses, who already have computerised systems in place, they should be double checking they’re within a subscription or cover contract to ensure they’ll receive the necessary updates. For those who don’t have a digital method of record-keeping, they should be testing and implementing suitable pieces of software.”
For more best practice advice, including how Making Tax Digital will impact your business and the accounting software that’s required to comply with it, call Mike on 01905 777600 or email email@example.com.
The UK government’s response to the Making Tax Digital consultations has finally been published and has broadly been welcomed by business leaders and the tax profession.
With the exception of a very few, it is expected that all businesses will be required to hold their accounting records digitally and submit quarterly updates to HMRC. In addition to this, an end-of-year reconciliation will be required to ensure all financial activities have been recorded.
Criticisms of the report have focused on the short timeline for further consultations for the legislation and also the cost of transition during the first year.
The government will continue to consider issues contained in the report, such as the exemption threshold, so the features in the report are not a finalised list of changes.
Here is a list of some of the proposed decisions for Making Tax Digital:
You can view the full report here
Due to the overwhelming response to the initial consultations, the government is taking more time to consider issues raised alongside fiscal impacts.
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At Ormerod Rutter we understand that finances and taxes can sometimes be confusing. We have 15 expert partners to hand that can offer expert advice on all financial. We pride ourselves on having big firm capabilities and a family firm personality. Have a question or want to discuss your personal or business finances? Give us a call on 01905 777600.
* Please note that all information contained in this article is for informative purposes only and that we cannot be responsible for any errors or omissions from use of this information.*
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