How to prepare your business for Making Tax Digital
23rd April 2018
Making Tax Digital (MTD) is the government’s plan for everyone to access and report tax information online through digital tax accounts.
Having all the information in one place, much like an online bank account, should help you pay the right amount of tax at the right time.
But delays and changes to MTD mean it can be hard to keep up with what’s going on, so where do we stand in April 2018?
Making Tax Digital timeline
From 1 April 2019, if you are VAT-registered with turnover above £85,000 you will need to:
- keep digital records for VAT
- send VAT return information to HMRC using software that compatible with MTD.
It will be at least 12 months on from then until everyone else has to comply with MTD, although this has changed once and may well be subject to further change.
Exemptions for Making Tax Digital
All businesses and taxpayers are exempt from MTD until April 2019, at which point VAT-registered firms will begin submitting digital accounts on a quarterly basis for VAT only.
Unincorporated businesses with annual turnover of between £10,000 and the VAT threshold of £85,000 will be exempt until April 2020 at the earliest.
However, it is possible to voluntarily begin this process earlier if they want to get ahead of the game.
The new rules will eventually apply to all types of business, including the self-employed, landlords and subsidiaries of charities, with annual turnover of more than £10,000 for all types of tax.
Software for Making Tax Digital
MTD affects how you store and report information but what you need to send HMRC will stay the same, so the biggest challenge is likely to be software.
You may need to upgrade your software to ensure it’s compatible for MTD. If you are already thinking about changing your software, making sure if it is suitable for MTD is vital.
Right now, the government has announced 2 suppliers – IRIS and Rhino – that have developed trial products to send income tax updates to HMRC.
A small number of businesses are believed to be submitting dummy tax returns as part of an MTD pilot scheme which began earlier this month.
Beyond that, the Revenue has no plans to provide free software so third-party providers, such as Xero or QuickBooks Online, are poised to fill the gap.
Those of you who currently keep spreadsheets will need to buy software that interacts with HMRC’s systems. This is likely to be in the form of an application programming interface (API).
If you’re still using paper records you will need to start using cloud accounting software or consider outsourcing the work to us.
You can find out more about getting your business ready for digital accounts or get in touch on 0117 305 2600 to see how we can help you be fully compliant.