Making Tax Digital
HMRC’s vision to digitalise the UK tax system is now well underway. The process started in April 2019 with VAT registered businesses with turnover exceeding the VAT threshold (currently £85,000) being required, from this date, to use commercial software to maintain their VAT records and send their VAT information to HMRC.
How does it affect you and your business?
MTD for Businesses
From 1 April 2019, businesses with a turnover above the VAT threshold (currently £85,000) now have to keep digital records for VAT purposes and provide this information to HMRC using MTD compatible software. The MTD requirement will remain even if turnover subsequently falls below the VAT threshold.
Keeping digital records and making quarterly updates will not be made mandatory for taxes other than VAT before April 2020.
Similarly, those businesses below the VAT threshold which have voluntarily registered for VAT can opt in to MTD.
MTD for Individuals
Personal Tax Accounts (PTAs) have already been created by HMRC for the majority of taxpayers in the UK.
The accounts are pre-populated with information already held by HMRC from banks, PAYE and other sources.
PTAs are set to be developed further and taxpayers will be able to report any additional sources of income through their digital account.
Rokaid Limited is happy to help individuals who may wish to register for a personal tax account do so. If you wish to do so yourself, you can by visiting www.gov.uk/personal-tax-account.
The Government has included a number of exemptions within the legislation surrounding MTD. These include where HMRC is satisfied that the business:
is run by a practising member of a religious society or order whose beliefs are incompatible with the use of electronic communications,
or for which HMRC is satisfied that it is not reasonably practicable to make a return using an electronic return system for reasons of disability, age, remoteness of location or any other reason.
A business may also be exempt if it is subject to insolvency procedures. However, there are procedures that allow for the right of appeal against the refusal of an exemption by HMRC.
Preparing for MTD
As a Rokaid Limited client, we will help you prepare for MTD including advising on the right software to incorporate in your business, as HMRC stipulates that businesses within the scope of MTD must use ‘functional compatible software’ to meet the new requirements.
HMRC permits the use of more than one piece of software to keep its digital records, but the programmes must be “digitally linked” and be able to connect to HMRC systems via an Application Programming Interface (API).
The software functionality must include:
However frequently they choose to submit, businesses must preserve digital records for up to six years.
How our team can help
Whatever the size of your business, MTD will ultimately affect your firm in the future so it pays to be prepared.
Rokaid Limited has been working with a number of businesses to help them prepare for the new system.
Part of our approach is making you aware of suitable existing online accounting platforms and helping you make an informed choice to suit your businessaa.
To discuss how the MTD reforms may affect you and your business, please contact us.