Making Tax Digital is fast approaching and with 2019 just around the corner, there is no time like the present to get your tax affairs in order.
According to HMRC, Making Tax Digital (MTD) “is a key part of the Government’s plans to make it easier for individuals and businesses to get their tax right and keep on top of their affairs”.
The introduction of MTD is HMRC’s effort at becoming one of the most digitally advanced tax administrations in the world. Although this may seem appealing and streamlined to some business owners, there are many sceptics fearing what the digital future will hold for their tax matters.
The main drivers behind modernising the tax system are to make the process more efficient, more effective and easier for taxpayers to remain compliant. The theory is that keeping all financial records together online will create a simpler method for business owners to reduce the number of mistakes made in submissions.
Recent figures from HMRC suggest that over £9bn in tax is lost annually due to errors in submissions. Originally scheduled to be introduced in April 2018, MTD for VAT is coming into effect from April 2019.
From this date, all VAT registered businesses with turnover in excess of £85,000 per year will be required to submit their VAT returns using MTD compliant software. Many businesses currently use the HMRC Gateway to submit their VAT returns. This will no longer be possible from April; instead, they must use software to transmit their VAT returns directly to HMRC. As a result, it is strongly recommended that all VAT registered businesses review their accounting software to ensure that it is compatible with MTD.
HMRC are also planning to extend MTD to Income Tax and Corporation Tax. This is pencilled in for April 2020 but we understand that there is likely to be a delay to this timescale.
The Government have suggested that the rollout of MTD for Income Tax and Corporation Tax will not take place until they are happy with the success of MTD for VAT. Tax Partner at Sedulo, David Evans, says:
“Anyone with questions about MTD affects their business, needs to get in touch straight away.”