MTD is looming

Making Tax Digital (MTD) will come into effect on 1 April, and this means that the vast majority of UK businesses with a turnover above the VAT threshold of £85,000 will need to keep digital records and submit VAT returns digitally.

MTD, which is an initiative brought in by HM Revenue & Customs (HMRC), is the biggest change to the tax system since PAYE was introduced. It is designed to ensure that the UK tax system is effective, efficient and supports the Government’s plans to be one of the most digitally advanced tax administrations in the world.

Once MTD has become introduced, business owners who previously used paper-based accounting methods or electronic spreadsheets will need to invest in specialist accounting software that is approved by HMRC.

However, HMRC has announced that for a small minority of businesses that have more complex requirements, having to comply will be deferred for six months to ensure that there is sufficient time for testing the services with them before they are mandated to join.

These businesses, such as ‘not for profit’ organisations and trusts have until 1 October 2019 to start keeping records digitally and using MTD-compatible software to send their VAT returns to HMRC.

The taxman also recognises that it will take small business owners a period of time to adjust to the changes the introduction of MTD will bring, so HMRC will not pursue filing or record-keeping penalties during the first year, as long as a business can demonstrate that they are doing everything within their remit to comply with the new rules. However, action will continue to be taken by HMRC to safeguard VAT revenue and sanctions will remain possible in cases of deliberate non-compliance.

Posted in Mark Hildred, Managing Partner.