Making Tax Digital
MTD – What is it and how will it affect my business?
What does MTD mean?
MTD stands for MAKING TAX DIGITAL – The exchequer loses billions of pounds of revenue each year due to mistakes in taxpayers VAT returns. MTD is modernising the UK tax system by creating a digital service to help businesses get tax right first time.
How VAT returns are being submitted is changing from April 2019. For each business their existing quarterly reporting will stay the same, the deadline for sending returns and how payments are made is not changing. What is changing is the way returns are submitted, this is now required to be in a digital format. Below we have detailed out who this affects and what exactly is changing.
Who is affected?
– Most VAT registered businesses with a turnover of OVER £85k*
– MTD is voluntary for VAT registered businesses with a turnover UNDER £85K
o What about those businesses UNDER VAT threshold?
§ Not VAT registered businesses are not affected
§ VAT registered businesses but with turnover UNDER £85K, MTD is optional. (a monthly check on the turnover for the previous 12 months is advised)
Once a business falls under MTD even if the taxable turnover falls below the £85k threshold then the business remains MTD mandated.
What is changing?
Businesses will need to start to use MTD compatible software to create a digital link between business accounts and the HMRC portal. This will mean businesses will need to:
Maintain information in a digital format, these are
– Time of supply
– Value of supply (net value)
– Rate of VAT charged
– Time of supply
– Value of the supply
– Rate of input tax that will be claimed
– Submit VAT returns – the digital link between VAT records and the return submitted to HMRC must be through API (application programming interface) enabled software
MTD requires a digital link between business software and HMRC. This therefore means no manual intervention or re-typing of information from one product to another and no copy and pasting.
What isn’t changing?
– Box 9 to be completed for a VAT return
– VAT frequency and payment deadlines
– Eligibility for VAT schemes
What about specific VAT schemes?
MTD for Income tax and Corporation tax is on hold until at least April 2020. HMRC have yet to announce any further details.
How can we help?
Bookkeeping Synergy can help with a smooth transition into digital tax by seamlessly moving your existing accounts to a cloud-based system and giving your business the peace of mind that you are MTD compliant as well as a full range of other services on offer.