Update on Making Tax Digital
By now, you are probably well aware of HM Revenue & Customs’ (HMRC’s) plans to modernise our tax system through the initiative of Making Tax Digital (MTD). In short, MTD drives mandatory digital record keeping and digital reporting for businesses.
Since its introduction the timescales for the roll-out of MTD have fluctuated. However, we now have more clarity from HMRC, who have provided the following timescales:
- MTD will be mandatory for VAT only from 1 April 2019
- MTD for accounting and reporting will not happen before 2020
Important information for VAT registered taxpayers
VAT is therefore the most pressing issue and from what we know so far, MTD obligations will apply to taxpayers registered for VAT and those whose turnover has exceeded the VAT threshold in the previous year (currently £85,000 with the threshold being frozen at £85,000 for 2018/19 and 2019/20).
For these VAT registered businesses, there will be two key requirements:
1. to maintain digital records to provide a complete digital audit trail to support VAT returns; and
2. to use MTD compatible software to report VAT data at least quarterly and receive information from HMRC, using an HMRC Application Programming Interface (API).
The crucial requirement for consideration is the ability for your data to reach HMRC electronically as the use of manual records will no longer be accepted. Many accounting software companies plan to incorporate HMRC APIs into their software, but it may be the case you will need to either export data to another system for submission or incorporate API functionality into your system.
How Mercer & Hole can help
Mercer & Hole offer clients an outsourcing service using the latest cloud-based accounting software. As well as enabling you to achieve the ambitions you have for your business, this can also provide peace of mind that your reporting is HMRC (and MTD) compliant.
With the timing of the MTD requirements, we would advise that it makes sense to ensure you are on a compatible digital platform for the start of your next financial year to mitigate any accounting and reporting issues.
We would welcome the opportunity to help you make the transition to MTD. Please do get in touch with me if you require advice.
Date: 19th July, 2018
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