Making Tax Digital (MTD) 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.
HMRC’s ambition is to become one of the most digitally advanced tax administrations in the world. Making Tax Digital is making fundamental changes to the way the tax system works – transforming tax administration so that it is:
The HMRC have taken a major step forward in this ambition with the introduction of Making Tax Digital for VAT.
VAT-registered businesses with a taxable turnover above the VAT threshold are required to use the Making Tax Digital service to keep records digitally and use software to submit their VAT returns from 1 April 2019.
The exception to this is a small minority of VAT-registered businesses with more complex requirements. They have made the decision to delay mandating for these customers until 1 October 2019 to ensure there is sufficient time to test the service with them in the pilot before they are mandated to join - see the timeline below.
| Date | Activity |
| April 2019 | Making Tax Digital mandated for all customers (except those that have been deferred). |
| October 2019 | Making Tax Digital mandated for customers that have been deferred. The 6-month deferral applies to customers who fall into one of the following categories: 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. |
Some businesses and agents are already keeping digital records and providing updates to HMRC as part of a live pilot to test and develop the Making Tax Digital service for Income Tax. If you are a self-employed business or landlord you can voluntarily use software to keep business records digitally and send Income Tax updates to HMRC instead of filing a Self Assessment tax return, you do not have to be VAT payers to use the service.
The majority of tax payers want to get their tax right but the latest tax gap figures show that too many find this hard, with avoidable mistakes costing the Exchequer over £9 billion a year. The improved accuracy that digital records provide, along with the help built into many software products and the fact that information is sent directly to HMRC from the digital records, avoiding transposition errors, will reduce the amount of tax lost to these avoidable errors.
We here at Wright Shaw & Partners offer the IRIS Kashflow accounting software package and the support to get you up and running with it. We have our own IT resource that will help you set up the package.
For those of you who are concerned about MTD and its implications or want a demonstration of Kashflow please call us on the number above and one of the team will be delighted to talk to you.