Making Tax Digital (MTD) is a government initiative that was first announced in spring 2015. The initiative is designed to make UK tax systems and record keeping digitalised. It aims to ensure tax administration and reporting & compliance are more accurate, preventing errors and refining the process to become simple, slick and efficient.
The rollout has been staggered but now applies to most business with taxable supplies above the VAT threshold but over time could expand to include more types of taxpayers and income tax.
Here’s what you need to know about MTD.
Making Tax Digital is a way for businesses to maintain their records digitally (paperless) while simultaneously improving efficiency. The idea is part of the government’s drive to ensure tax is calculated correctly and on time while also making it simpler too.
Implementation of MTDfV (MTD for VAT) has begun since April 2019. VAT registered businesses with a taxable turnover above the VAT threshold are covered by the scheme and are now required to use MTD compliant software to keep their VAT related records digitally and to file their VAT returns using commercial softwares.
Not all VAT-registered businesses are obliged to use MTD just yet but the government has plans to extend the scheme further. Eventually Income Tax and Corporation Tax will also be included but there’s no firm details about how or when this will take place, a pilot project to test MTD for Income Tax (only sole traders and UK landlords) is already live.
Only businesses with a taxable turnover exceeding the VAT threshold are currently obliged to convert to be digital but HMRC is extremely keen for as many people to use it as possible.
Therefore, if you’re under the VAT threshold (but VAT registered i.e voluntarily registered) you can still take part, even though it’s not mandatory. HMRC believe that the software and improved process allows businesses to have a better understanding of their performance and the tax liabilities which will arise.
Although HMRC are very enthusiastic about the move to digital returns, they’re not supplying any free software for businesses to use. This means if MTD applies to your business you’ll need to source software which is MTD compatible. HMRC have produced a list of suppliers for such a software.
We at MGM & CO. have access to and use of such compatible software packages.
Here at MGM & Co we’re passionate about bringing the latest software and technological advances to our clients, which is one reason why we’re Xero-certified. We can help with all aspects of MTD compliance and the provision of compatible software.
If you think MTD might apply to your business or simply want to know more, contact MGM & CO. today.Contact Us