Making TAX Digital (MTD) – Are you preparing?
HMRC is soon to make a fundamental shift in the way UK tax is administered. This will affect all but the smallest of businesses. A new digital process is to be introduced to provide HMRC with ‘real time’ information. This is inevitably going to have an impact.
Businesses will need to record their transactions regularly and be able to submit them electronically to HMRC via MTD-compatible software. A spreadsheet, an internet connection, a data storage facility and a link to compatible software will be the minimum requirements. According to ICAEW research, 25% businesses recently surveyed are still using a paper-based system.
When is this going to happen? The first wave will begin on 1 April 2019 for all VAT registered businesses whose taxable turnover is above the £85K threshold. This includes unincorporated businesses, partnerships, limited companies, LLPs, trusts, non-UK businesses registered for UK VAT and charities. An exemption for the ‘digitally excluded’ is included in the regulations.
Businesses may well need help to determine their start date, assessment of turnover and choice of appropriate software. Liz Mitchell comments “VAT-registered businesses need urgently to begin preparations or seek advice to ensure that they are able to make a smooth transition.”
Non VAT-registered Businesses
Non VAT-registered businesses will not be affected until April 2020 at the earliest. The biggest challenge will be for those businesses/landlords who do not regularly record their transactions in any digital form (an Excel spreadsheet, for example). In all likelihood, MTD will require you to submit quarterly returns which will mean that regular digital record-keeping will become essential.