15 MARCH 2018
What we do know is that business tax will pioneer this brave new world, with VAT being the first element to be given the digital treatment.
What is Making Tax Digital?
Making Tax Digital (MTD) is the government’s ambitious new plan to fully digitise the tax system in the UK, with HMRC aiming to be one of the most digitally advanced tax administrations in the world. Their stated ambition is the ‘end of the tax return' and a 'transformed tax system' by 2020, with real-time filing a likely end goal. That being said, there is still some uncertainty surrounding MTD, not helped by the government’s U-turn on timings. What we do know is that business tax will pioneer this brave new world, with VAT being the first element to be given the digital treatment. As such, from April 1st 2019, all businesses with a turnover above the VAT threshold (£85,000) will have to digitally submit their VAT returns on a quarterly basis using MTD-compliant software. In addition, these businesses will be required to keep a store of their tax records digitally, if they are not doing so already.
What is the timeline?
Given the scale of this transition, HMRC will roll out the MTD plan in stages & has already delayed plans for wider rollout to give companies more time to comply. So far, private testing through a small scale business pilot has already begun to test and develop MTD for income tax and NICs, but it is not expected that MTD will be applied to other forms of taxation until at least 2020, once the VAT system has proven successful.
What does MTD mean for businesses?
HMRC is touting four major benefits for businesses driven by MTD. These are:
How can you prepare?
Here at Xelix, we are working with HMRC to provide an MTD compatible software package aimed at helping both large and small businesses alike to meet the MTD requirements. Importantly, for those companies not capturing tax information digitally, our service does not involve setting up a cloud based accounting service.
Get in touch below to understand how we can help.