Making Tax Digital (MTD) is a government initiative which will simplify the way businesses report their income, expenditure and taxes, and marks the end of the traditional way in which we have submitted information to HMRC.
HMRC say their “ambition is to become one of the most digitally advanced tax administrations in the world. Making Tax Digital is making fundamental changes to the way the tax system works – transforming tax administration so that it is:
easier for taxpayers to get their tax right”
So how does it work?
Tax Return will become an ‘all year round’ business: income and expenses will have to be submitted to HMRC quarterly, followed by an ‘End of Year’ statement.
The HMRC online VAT service will close as of the 1st April 2019, so it won’t be possible to submit VAT returns directly to HMRC.
Accounts will have to be kept in a digital format, and filed through an HMRC- approved accounting software.
The accounting software will talk to HMRC in real time, so both you and the taxman will be able to see your up-to-date timeline at any time. This will make end-of-year reconciliations much easier, and avoid nasty surprises.
When does it start?
The roll out of the new system will affect some businesses from 1st of April 2019. In particular, for VAT registered who will no longer be able to submit the information manually.
What’s good about it?
It’s about progress and moving forward towards easier and more efficient solutions. It's about harnessing the power of the software of tomorrow and making use of the richer data available through apps and software.
Should I change the way I keep my accounts?
If you don’t feel sure, please refer to the HMRC help page and/or seek professional advice.
Here you can find a list of software suppliers approved by HMRC.
Whichever solution you decide to go for, remember being prepared is key, so it is important you get ready for MTD now.