MTD moves a step closer for half a million businesses
Are you one of them and if so what do you need to do?
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.
HMRC’s announcement on 16th October that it was extending its pilot scheme to around half a million businesses, is a big step. The progress of MTD before now has arguably been slow.
What was the pilot scheme?
The MTD pilot scheme included a private group of accountants and their businesses which had a VAT taxable turnover of at least £85,000. The idea of the initial pilot was to test the systems and iron out any problems.
Do I need to file my returns digitally from now on?
HMRC’s recent announcement means that now more businesses, including sole traders, with a VAT taxable turnover of at least £85,000 will be able to join the MTD pilot.
However, there are some exceptions. You’ll currently be unable to join if you:
- Trade with the EU
- Are based overseas
- Submit files annually
- Make payments on account
- Use the VAT Flat Rate Scheme
- Have incurred a default surcharge in the last 24 months or
- Are newly registered for VAT and haven’t submitted a VAT return before.
If you tick any of these boxes, then you won’t be able to join just yet but the scheme should be open to you in the coming months.
What’s in it for me?
Making Tax Digital is a fundamental change to the way the tax system works and HMRC hopes it will make tax administration:
- More effective
- More efficient
- Easier for taxpayers to get their tax right
Having all your records on digital file rather than on paper should also provide more accurate stock checks, allows for easier business forecasting and reduces the risk of a fine due to incorrect tax payments.
By keeping up-to-date digital records in real time, businesses are less likely to lose receipts and over time, nudges or prompts will be introduced into software which will help to eliminate common errors.
What do I need to do now?
Although those eligible are able to join the MTD scheme, it won’t be a legal requirement for them to do so until 1 April 2019.
All businesses who are not currently permitted to take part will be required to do so by law from 1 October 2019.
It’s important that you ensure that your business is ready to join well ahead of April next year.
If you have an accountant, speak to them to make sure everything is in place. If you don’t have an accountant, you’ll need to check that the invoicing and expenses software you use or plan to use is MTD compliant.
Around 150 providers have already said they will provide MTD-compliant software and more than 70 have already had their solutions recognised on HMRC’s website.
Where can I get more guidance?
HMRC has released new and updated guidance to help VAT-registered businesses and their agents with the new requirements.
Your accountant should be able to guide you
A good accountant will be able to offer advice on the process of MTD, what it means for your business and the software you can use.
We’ve already been working with our clients on the changes that MTD will bring and we’ll continue to do so. If you’d like to speak to us about anything MTD, we’d love to hear from you.