MAKING TAX DIGITAL (MTD)

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In August 2016, HMRC issued six consultation documents on making tax digital (MTD). The consultation period ended 6 November 2016.  On 13 July 2017, the Government announced MTD will commence in April 2019 for VAT purposes for businesses with turnover above the VAT threshold (currently £85,000) and will be delayed until at least 2020 for all other businesses.

Under MTD for VAT, the information required to be held in the VAT account must be kept digitally (the regulations refer to this as your “electronic account”), and the information in that electronic account will be used by functional compatible software to calculate and fill in your VAT return.

Are you using functional compatible software?  You may be required to change you software systems, processes and procedures.

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The truth is there are still quite a few unknowns about Making Tax Digital, digital disruption and the wider accounting landscape in the future.

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In summary, you will be required to:

  • Prepare and submit VAT returns from April 2019 using Making Tax Digital compatible software;
  • Keep integrated digital records;
  • Digital records will need to be preserved for up to 6 years;
  • Prepare and submit Corporation Tax returns from April 2020 at the earliest using Making Tax Digital compatible software;
  • Self-employed and landlords with income in excess of £10,000 will need to prepare and submit returns from April 2020;
  • Review existing record keeping processes and software; and
  • Budget for expenditure as there will be one-off and ongoing costs.

Below are some useful links to help get you started.

Disclaimer This overview should not be relied upon as comprehensive guidance but as a reminder of some of the key points of MTD and users should refer to HMRC for more detailed guidance. Please see https://www.gov.uk/government/publications/making-tax-digital/overview-of-making-tax-digital.  If you require further help with your planning please contact us.

HMRC’s Four Foundations of Making Tax Digital

Better use of information
MTD presents significant benefits for customers as they won't have to give HMRC information that it already has, or can get from elsewhere i.e. from employers, banks, building societies and other government departments. Digital tax accounts will mean that customers can see the information that HMRC holds and check at any time that their details are complete and correct. HMRC will use this information to tailor the service it provides, according to each of our customers’ individual circumstances.
Tax In real time
Our customers should not have to wait until the end of the year or longer to know how much tax they should pay. HMRC will collect and process information affecting tax as close to real time as possible, to help prevent errors and stop tax due or repayments owed building up.
Interacting digitally with customers
Our customers (and their agents) will be able to interact with HMRC digitally and at a time to suit them. They already have access to a digital account which will present them with an increasingly personalised picture of their tax affairs, along with prompts, advice and support through webchat and secure messaging. And digital record keeping software will be linked directly to HMRC systems, allowing customers to send and receive information directly from their software.
A single financial account
At the moment most taxpayers cannot see a single picture of their liabilities and entitlements in one place – we are changing that. By 2020, customers will be able to see a comprehensive financial picture in their digital account, just like they can with online banking.
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