Updated: 7th May 2020
Making Tax Digital: Are You Ready?
Making Tax Digital was introduced for the majority of VAT-registered businesses in the UK from April 2019, but some businesses, particularly those with a more complex operational model or structure, have benefited from a deferred commencement date of 1st October 2019. As this date is rapidly approaching, Julie Palmer, partner at RBR Advisory, explains what the Making Tax Digital initiative is and how businesses need to be preparing for its implementation.
What is Making Tax Digital?
Making Tax Digital (MTD) is the overall system that’s changing the way businesses submit information, returns, and reports to HMRC. Legislation introduced by the government now requires businesses to use specific processes to submit VAT returns, and keep VAT records in a certain way. MTD is not optional and all businesses must comply with these regulations even if this means changing their current methods, processes, or software package.
VAT-registered businesses with a taxable turnover above the current threshold of £85,000 must comply with this new legislation, but certain businesses have been informed by HMRC that their deadline for MTD registration has been deferred to October 2019.
Which businesses have been deferred?
Due to their complexity compared with other businesses, some organisations have had their deadline deferred to 1st October 2019. These include, but are not limited to, the following types of business:
- Local authorities
- Public corporations
- VAT divisions and groups
- Non-incorporated not-for-profit organisations
- Those using the annual accounting scheme
New VAT requirements for deferred businesses
Essentially, Making Tax Digital affects the way you keep your VAT records and how you submit your VAT returns. You’ll need to keep digital records and submit VAT returns digitally using software compatible with HMRC.
The new rules apply whether you send your returns to HMRC on a monthly, quarterly, or annual basis. Additionally, if you use an in-house bespoke record keeping system you may need ‘bridging software’ to connect you to HMRC’s own systems.