HM Revenue & Customs (HMRC) are moving towards digitalising the UK tax system with new legislations set to phase in from April 2019.
So what is MTD? Making Tax Digital or MTD is designed to do exactly as its name suggest. HMRC’s ambition to becoming the world’s most digitally advanced tax authority has led to the introduction of MTD which ensures that individuals and business keep electronic records of their accounts using an approved MTD software.
At present HMRC receive information about individuals and businesses through the filing of annual accounts, tax returns and submissions of quarterly/annually VAT returns using HMRC’s online platform.
The new scheme allows HMRC to interact with individuals and businesses digitally with proposals for a more frequent reporting requirement. This system intends to be transparent, increase accuracy in reporting and reduce fraudulent activities.
What does this mean for you?
Making Tax Digital changes the way your business works, but finding the right solution can mean a change for the better. With less than a year to go before the Making Tax Digital (MTD) for VAT start date there’s not long left to familiarise yourself with the new system.
From April 2019 VAT-registered businesses with turnover above the VAT threshold (currently £85,000) will be required to digitally record their accounting documents such as invoices and receipts and submit VAT returns using MTD-compliant accounting software.
For other forms of tax, individuals and businesses will likely be required to submit their accounts every quarter when MTD becomes mandatory.
What should you do now?
To be effective, preparation needs to start now in order to make the transition in April painless. If your business is going to be within the regime from 2019, it is crucial to make sure in advance that your accounting software meets HMRC requirements for MTD. For some businesses this may mean implementing a digital accounting system for the first time. Prohal works closely with many software providers. We can review your systems and accounting needs and recommend the best possible accounting system that is suitable for your business and also enable you to meet the requirements of MTD.
If you would like to discuss how MTD will impact you and your business, please contact one of our dedicated partners who will be happy to assist.