Making tax digital is a flagship program by the UK government that requires businesses that have an annual turnover of above £85,000 to do online tax filing and payment as from 1st April 2019. They are also required to keep business records digitally. The scheme will encompass all the business taxes but for now, only Making Tax Digital has a set date. The rest will follow by the year 2020 until the entire tax system is turned digital. There is no doubt that MTD is going to impact businesses, be that small or large, in a big way.
These are some pertinent questions you could be asking about the Making Tax Digital program
How will MTD for VAT affect my business?
Any business that meets the minimum turnover threshold given should preserve their VAT records in a digital form. They are required to send their returns to the HMRC on a regular basis using the MTD compatible and authorised software. Here, you should be careful with the software you go shopping for as you must get specific, HMRC authorised one. Familiarise yourself with the VAT Notice 700/22, which outlines how the VAT records are supposed to be kept digitally. To be safe on this, get a reputable MTD software consultant to guide you.
When does the Making Tax Digital begin?
For businesses with a minimum annual turnover of over £85,000, the compliance kick-off date is April 1st, 2019. For other businesses, which comprise about 3.5% of the total, MTD for VAT will begin in October 2019.
Will MTD apply to my business?
Simply put, any business that that is already registered for VAT and is within the required turnover margin is eligible for MTD. Again, if your business is not there yet but you suspect that it will be there soon, you should brace yourself by keeping your VAT records digitally. This will ensure that you are on the right tracks in time for the deadline.
You may be asking yourself: With the introduction of Making Tax Digital for VAT, will I still be required to file my VAT returns using the HMRC VAT portal to file returns?
HMRC portal website is ideally a manual way of filing VAT. It’s actually like filing returns using paper-forms and this is what the government is phasing out. All businesses will be required to use the MTD- compatible software to file tax henceforth.
What are deferred businesses?
According to the HMRC, some businesses qualify differently for MTD and these businesses are supposed to comply at the beginning of October 2019. Again, this group of businesses will not be allowed to be in the MTD pilot program until spring 2019. Some of the businesses that have been deferred for MTD for VAT include: those businesses that are required to make their payments on account, those who use the annual account scheme, trusts, any non-profit organisations that are not registered as a company, all VAT divisions and groups, local authorities, public corporations and those traders doing business overseas.
It is therefore clear that MTD for VAT is inevitable and to be on the safe side as a business, you must ensure that you fully comply with the HMRC guidelines and keep up to date on any new developments before the rollout date and after.