HMRC Update to Making Tax Digital (13th July)
Gone are the days of shoebox accounting. Millions of businesses across the country are already banking, paying their bills, and working with their customers and suppliers online.
As more and more of our lives and business move onto the web, it makes sense that the taxman would also jump on the bandwagon eventually. Making Tax Digital (MTD) is HMRC’s initiative to completely revolutionise the tax system; ultimately bringing an end to self-assessment in the UK as well as many other well-established methods of reporting and paying taxes.
Last summer, the government announced their timetable for MTD implementation and they stated that they planned on moving to an entirely digitalised tax system by the year 2020.
While there has been plenty of confusion as to how MTD would be brought in, one thing was certain; introducing a brand new tax system across the UK will be anything but smooth.
The update – VAT on MTD from April 2019
The government continues to drip feed more details to businesses as to how the MTD plans will work in practice.
In their latest update published earlier this month, HM Revenue and Customs have released further information to support businesses and their accountants in the run-up to the start of the mandatory MTD VAT service next April.
The update has confirmed that only the VAT plan will be mandatory from April 2019 with other aspects of MTD expected to follow on later. HMRC’s information pack includes:
- A new HMRC VAT notice to inform customers of the current plans and to make amendments to the VAT Regulations published earlier this year.
- A list of software developers that HMRC is currently working with throughout the MTD VAT pilot. A prototype demonstration has already been carried out, and the next step is for HMRC to test out their MTD software accounts on real businesses and agents.
- This includes all of the software companies whose products HMRC confirms can be used for MTD for VAT.
- A communications pack to provide source material for stakeholders to help their clients, customers, or members to prepare for the changes MTD will bring.
The latest Making Tax Digital timeline
At the moment, micro businesses and landlords can take part in MTD for Income Tax on a voluntary basis.
As HMRC continue to test and refine their services they have started inviting even more businesses to join in this experimental phase; slowly developing a digital tax system that will eventually be rolled out for almost all types of tax.
HMRC have already launched pilots for their Income Tax and VAT schemes. Here is the most up to date version of their timetable so far:
Public MTD pilot for Income Tax launched
Private MTD pilot for VAT launched
Public VAT pilot launched
From 1 April 2019, all VAT registered businesses with a taxable turnover above the VAT threshold are required to keep digital records and send VAT returns digitally to HMRC using MTD-compatible software
Sole traders and partnerships with an income of between £10,000 and £85,000 will also be required to use digital systems for corporation and income tax purposes
Making Tax Digital for VAT
More information has been provided for Making Tax Digital for VAT (MTDfV). The VAT notice lays out further details of the scheme and explains whom the changes will actually apply to.
Under the new rules, all businesses with a taxable turnover that exceeds the VAT threshold – currently standing at £85,000 – will be required to keep digital records for VAT purposes and provide their VAT return information to HMRC via a new programming interface.
HMRC have also confirmed that companies that do not currently exceed the VAT threshold but which have in the past will also need to use the digital system. That means only those who have never had a taxable turnover over £85,000 will be exempt.
This means businesses will need to keep a close eye on their turnover throughout the year.
If you think you’re close to the VAT threshold, then it may be worth volunteering to take part in the scheme pre-emptively.
Help with Making Tax Digital
The world of tax is changing and your business must be able to keep up. If you would like professional advice and guidance on how MTD applies to you, which accounting software might be best for your business, or how to get your company compliant in time, speak to your Maple accountant today.
Get a head start by contacting us – email email@example.com or call 01332 207 336