Making Tax Digital (MTD) is proposed to help bring the tax system into the 21st century by providing businesses with a modern, streamlined system to keep their tax records and provide information to HMRC.
The roll out for MTD has been amended to ensure businesses have plenty of time to adapt to the changes.
Recent announcements around MTD now place VAT firmly at the forefront of these proposals.
Under the new timetable, where MTD will be available on a voluntary basis for the smallest businesses, and for other taxes:
- only businesses with a turnover above the VAT threshold (currently £85,000) will have to keep digital records and only for VAT purposes. Such businesses will no longer be able to keep manual records.
- they will only need to do so from 2019
- and businesses will not be asked to keep digital records, or to update HMRC quarterly, for other taxes until at least 2020
This means that businesses and landlords with a turnover below the VAT threshold will be able to choose when to move to the new digital system. All businesses and landlords will have at least two years to adapt to the changes before being asked to keep digital records for other taxes.
Here are a few issues for consideration:
- Maintaining your business records – Businesses will no longer be able to use manual records. If the previous proposal regarding spreadsheets is maintained, spreadsheets may be used, but will need software overlaid in order to make the quarterly submissions to HMRC.
- VAT return submission – it is unlikey to be the same submission format or information as completed now. All VAT returns will need be filed directly via software through the government gateway. How will your software allow for the manual adjustments you may now make for say fuel scale charge or corrections?
- Brexit – MTD for VAT will take place at the same time as the UK leaves the EU (April 2019). Uncertainty around the VAT treatment of transactions between the UK and EU will inevitably arise.
- Is there a cost implication – Businesses that don’t currently use software will need to buy software (and hardware) to be MTD compatible. It is understood that HMRC will not be providing free software for MTD.
Although there is now the welcome implementation delay, here at CRM we will not be waiting until 2019 to plan how we can help our clients be ready for MTD. We are already supporting our clients with cloud accounting and the move to digital systems.
If you would like to know more about our recommended Bookkeeping / Record Keeping system that will be MTD compliant, then please do not hesitate to contact us.