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.

MTD Exemptions 

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:

  • Keeping records in a digital form
  • Preserving digital records in a digital form
  • Creating a VAT return from the digital records held in functional compatible software and providing HMRC with this information digitally
  • Providing HMRC with VAT data on a voluntary basis
  • Receiving information from HMRC via the API platform that the business has complied.
  • Under the rules, businesses are required to submit summary totals of their digital records to HMRC at least every quarter and are required to submit their VAT returns using their compatible software. Information will then be pulled from the digital records to populate the VAT return.
  • Businesses submitting monthly or non-standard period returns will be able to continue to do so. Some businesses may choose to submit VAT information more frequently than their VAT return obligations require on a voluntary basis, while others may choose to voluntarily provide further information by way of periodic updates and supplementary data.

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.

To find out more about how we can help you, please contact us.