Making Tax Digital – Key messages for businesses and landlords

Making Tax Digital

When it comes to Making Tax Digital there are some key messages for businesses, other VAT-registered entities and landlords.

From 1 April 2019, VAT-registered businesses, with a taxable turnover above the VAT threshold (currently £85,000), are required to keep digital records for VAT and send HMRC returns using MTD-compatible software.  You can find out more about joining the pilot on GOV.UK.  Businesses can also take advantage of the opportunity to go digital for Income Tax.  Visit GOV.UK to find out more.

The exception to this is for any business that form part of a small group that have been deferred.  As part of HMRC’s planning for the pilot, they have continued to engage with stakeholders and listen to their concerns about business readiness for MTD.

HMRC made the decision to delay mandation for 6 months until October 2019 for a small minority of customers with more complex requirements. This was to ensure there was sufficient time for testing the service with them in the pilot before they are mandated to join.

Timetable

This timetable shows when different types of business can join the pilot and when they will be mandated to use the MTD system.

If you run a business it’s important you are aware of the obligations should you choose to join MTD for Income Tax or VAT.  You must keep digital business records and:

  • for VAT, submit returns to HMRC using MTD-compatible software
  • for Income Tax, provide summary updates of income and expenses to HMRC quarterly (or more often if they choose) through MTD-compatible software

The deadlines for sending VAT returns and making payments are not changing, including for monthly, quarterly and annual VAT return schemes, but businesses will have to keep digital records and send the returns to HMRC using MTD-compatible software for VAT accounting periods that start on or after 1 April 2019 (1 October for those that have been deferred). This also applies to businesses that operate the Flat Rate Scheme for VAT.

Support

If you have an agent, speak to them about  Making Tax Digital and/or the MTD pilot.  If you don’t currently have an agent or Accountant to help you with this get in touch with me.

Software

If you already use software, you should speak to your software provider to find out when it will be MTD-compatible and what you have to do. A list of software developers that have already produced MTD VAT-compatible software is available on GOV.UK .

You do not need to keep any additional business records because of MTD.  However, business records must be kept digitally to be compliant. If you use spreadsheets, the spreadsheets must be able to submit the required data to HMRC digitally, for example, by using MTD-compatible bridging software.

Bridging software allows relevant data to be digitally exchanged from the spreadsheet or other source where the digital records are kept, directly to HMRC. The summary information must not be physically re-typed into another software package.

For larger businesses using bespoke in-house software solutions, make sure your IT team is aware of the new MTD technical standards as they may want to link in-house solutions directly to HMRC’s APIs. For more information contact SDSTeam@hmrc.gsi.gov.uk.

If you are a business or landlord that wants to join the MTD Income Tax pilot you’ll need to keep digital records and send updates to HMRC using compatible software. More information about existing products and how to join the pilot is available on GOV.UK.