What is MTD?
Making Tax Digital (MTD) is a HMRC initiative which is designed to ensure that the UK tax system is effective, efficient and easier for tax payers to get their tax right – HMRC’s ambition is to become one of the most digitally advanced tax administrations in the world.
According to a recent Survey carried out by the Institute of Chartered Accountants in England and Wales (ICAEW), approximately 40% of businesses, who are soon to be affected, are still not aware of MTD for VAT.
The preliminary mandatory stage of HMRC’s MTD initiative will focus on VAT. From 1 April 2019, all businesses who are VAT registered with a turnover above £85,000 will be required to maintain and submit their accounting records through a digitally compatible software product for VAT purposes – businesses will no longer be able to maintain and submit paper records as this process will no longer be compliant.
For other areas of MTD, such as income tax and corporation tax, HMRC has put these plans on hold until 2020 at the earliest.
Under MTD, as tax data is required to be submitted digitally every three months, HMRC contend that it will make it much simpler for businesses to keep on top of their financial information and business owners will gain a better understanding of their business position.
How will MTD benefit my business?
MTD is intended to bring many benefits to organisations, such as:-
• a secure, simple and fast way of paying online;
• easy access to all tax information in one place, eliminating the possibility of manual errors;
• giving business owners a clearer understanding of their tax position;
• access to financial information 24/7 from compatible devices;
• business owners will be able to spend more time focussing on growth and less time gathering paperwork for their tax returns.
What do I need to do now?
At Horsfield & Smith, as Xero Gold Partners, we have been busy preparing for MTD using Xero cloud accounting software. Xero is a HMRC recognised software provider and we are ready to help businesses with the transition to the Making Tax Digital mandate.
We recommend that you get in touch with us today by calling 0161 761 5231 so that we can advise you on the best way forward for your business to ensure you are compliant in advance of the April deadline.