HMRC have now introduced the Making Tax Digital (MTD) regime. They have taken the decision to roll out this scheme due to huge tax losses through clerical error, carelessness, legal interpretation, insolvency, avoidance, and other criminal activity. It is estimated that taken together, the resulting tax gap is £33 billion.
MTD is going to have a significant impact on how businesses submit taxes and run their business. FFigures is fully prepared for the rollout and can provide a support package that suits you and your company’s requirements.
MTD for Businesses
MTD was originally due to launch in 2018 and phased in over 2 years. However, a number of delays have led to timescales and scope being revised. From 1 April 2019, businesses with a turnover above the VAT threshold (currently £85,000) will have to keep digital records for VAT purposes and provide this information to HMRC using MTD compatible software. The MTD requirement will remain even if turnover subsequently falls below the VAT threshold.
Keeping digital records and making quarterly updates will not be made mandatory for taxes other than VAT before April 2020.
Similarly, those businesses below the VAT threshold which have voluntarily registered for VAT can opt in to MTD.
MTD for Individuals
Personal Tax Accounts (PTAs) have already been created by HMRC for the majority of taxpayers in the UK. These are pre-populated with information already held by HMRC from banks, PAYE and other sources. They are set to be developed further and taxpayers will be able to report any additional sources of income through their digital account.
Individuals may wish to register for a personal tax account.
The Government has included exemptions within the MTD legislation, including for businesses that meet at least one of the following criteria:
- Your business is run by a practising member of a religious society or order whose beliefs are incompatible with the use of electronic communications.
- It is not reasonably practicable to make a return using an electronic return system for reasons of disability, age, remoteness of location, or any other reason.
- You are subject to an insolvency procedure.
Will I have to change my accounting software?
That depends. Speak to your existing accounting software provider or FFigures to check if your existing software is MTD-compliant. MTD is also the perfect opportunity to review your accounting software to see if it still meets your business needs and future aspirations. See how FFigures can advise you how accounting software could help to underpin your growth plans.
Can I use Excel?
While the underlying data can be stored on a spreadsheet and all calculations done within the spreadsheet, a spreadsheet alone will not be linkable to the HRMC system. You will need to use "bridging software" to transfer this data in the correct form to HMRC. FFigures can offer this bridging service as part of your package or offer advice on moving to a MTD compliant software package.
Will MTD increase our workload?
If handled correctly, MTD should actually result in time savings after the initial setup. We at FFigures see this as an opportunity to review your current business processes and understand if any other systems or processes can be improved at the same time.
What happens if we are late to file our first return under MTD?
HRMC are running a "soft landing" period which will essentially allow for businesses to have some teething problems at the start. We would therefore expect no penalties to arise for a late submission, however all data will still need to have been recorded digitally from 1st April 2019.
Does MTD apply to VAT registered businesses with a turnover below the threshold?
No, if your business is voluntary registered for VAT with taxable turnover below the VAT registration threshold then you are outside the scope of MTD and will still be able to use the HMRC online services to submit your VAT returns.
Want to know more?
If you would like more information or would like to speak to us direct, then call us on 01702 842 180. Or ask us a question online!