Is “Making Tax Digital” one of those phrases that makes your brain switch off? All it really means is that businesses will have to record their basic accounts, sales and expenditure on an accounting software package such as Sage or Quickbooks etc. Excellent news for accounting software companies.
Once your accounts are on a compatible package, you will be able to submit returns directly to HMRC. The questions so far has been when it will start, who will have to do it and which taxes or returns it will apply to.
Originally, when the Making Tax Digital (sometimes referred to as MTD) legislation came out, the timetable for it all to happen all looked too sudden for it all to happen smoothly in real life. The latest Finance Bill in July recognises that, and a more realistic timetable has been put in place.
VAT only at first
Only businesses with turnover above the VAT threshold (currently £85,000 a year) will need to keep digital records and only for VAT purposes. The wording is very specific. It does not say “registered for VAT”, only that the turnover is above the threshold *. So that means if your turnover is below the threshold, but you have registered for VAT voluntarily eg for Flat Rate VAT purposes, or to reclaim import VAT, this does not currently appear to apply to you.
If you are above the VAT threshold, you are probably submitting quarterly returns already, so this will hopefully be not too big a change.
Starting from April 2019
This will only start from April 2019. So plenty of time.
Businesses will not be asked to keep digital records or update HMRC quarterly for other taxes until at least April 2020 (the original date was April 2019).
At the moment, we would estimate that around 75% of our clients use accounting packages for their business accounts. The only catch is that you will have to provide your VAT return information to HMRC “through Making Tax Digital functional compatible software” * At the moment, Sage for example say that they “continue to work closely with HMRC to help clarify exactly what Making Tax Digital means for you and your business.” Which implies it is maybe not as clear as it might be. Never mind, 18 months to sort it out.
Two nice solutions
If you were thinking that now is the time to get yourself sorted out with a good accounting package, we can help you out with choosing one, getting it installed and set up, and getting you trained up on how to use it and show you all the amazingly clever things it can do.
If you detest all things that involve computers, online or have the word “software” in them, don’t worry. We can input your figures for you and submit returns electronically.