Five facts about Making Tax Digital

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:

 

FACT 1: You’ll have to submit tax returns more frequently

 

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.

 

FACT 2: The next 12 months are key

 

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.

FACT 3: Not everybody has to comply with it

 

MTD applies to the vast majority of taxpayers, but not all of them. These businesses include:

 

  • Self-employed individuals and unincorporated businesses with an annual turnover of less than £10,000
  • Charities
  • Community amateur sports clubs
  • Insolvent organisations

 

FACT 4: You can still use spreadsheets

 

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.

 

FACT 5: It does matter to most businesses 

 

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.

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