Making Digital (MTD) is HMRC’s most ambitious initiative to make it easier for individuals and businesses to get their tax right. MTD signifies a paradigm shift towards changing the functioning of the tax system, making it more effective & efficient, as well as easier for taxpayers to get their tax right. HMRC’s ambitious Making Tax Digital (MTD) focuses on VAT and imposes new requirements on some VAT registered businesses and organisations. This includes unincorporated businesses, partnerships, companies, LLPs, trusts, non-UK businesses registered for UK VAT and charities.
From April 2019, VAT registered businesses and organisations with taxable turnover above the VAT threshold of £85,000 are required to:
Initially, MTD will be implemented for VAT-registered businesses. For all other types of taxes, MTD will be implemented in a phased manner.
To put it in simple words, earlier businesses were able to maintain their records in excel spreadsheets and calculate VAT and then by logging onto HMRC’s website, they were able to fill 9 boxes of VAT return by entering numbers manually. With the introduction of MTD, this option will no longer be available.
All businesses will have to use software to submit VAT returns. Several Cloud-based software have been approved by HMRC for the submission of VAT returns under MTD.
Businesses can use either:
Also, small businesses, who cannot afford Cloud-based software, have the option to use Bridging software to submit information digitally to HMRC.
Such Bridging software should have the capability to:
Exemptions from MTD
Businesses are exempted or do not have to comply with MTD if
To claim an exemption, a business must call or write to HMRC and provide the information specified in the updated guidance. Until HMRC’s decision is received in writing, businesses should continue to file VAT returns in the usual manner.
The requirement to keep digital records does not imply that businesses have to scan digitally and store invoices and receipts. Businesses can continue to keep documents in paper form if they prefer but each individual transaction needs to be recorded and stored digitally.
HMRC would like to encourage records to be kept in as near to real time as possible,
For Supplies Made:
For Supplies Received:
What Happens on 1 October 2019?
Businesses in the deferral group must keep digital VAT records from first VAT Return period starting on or after 1 October 2019 if your business has a taxable turnover over £85,000 and either:
HMRC will send you a letter informing about inclusion in the deferral group. If you haven’t received a letter, your business is not in the deferral group.
How Initor Can Help with Making Tax Digital for your Business
Businesses can continue focusing on the growth of business and we will take care of all MTD compliance. Our team of experts will help prepare and submit VAT Returns. Initor team will speed up key business processes, saving time, reducing human errors and minimizing costs by driving efficiencies.
We can help you sign up your business for MTD for VAT. Businesses must sign up for Making Tax Digital at least one week before your VAT Return is due.
All businesses are required to comply with MTD and submit their VAT returns via HMRC’s new digital platform. It is important to use accounting software or a combination of software packages that are compatible with HMRC’s digital platform, or spreadsheets. Initor Global team will advise you on the cost-efficient accounting software to be used.
If you are using Excel spreadsheets, we will advise you on compatible software to be used.
Our team will adopt a highly effective approach to digital transformation. This will not only help to comply with MTD, but also with future tax legislation. Getting ready for MTD is a great way to gain the advantage of the wider benefits of digital transformation across whole finance and accounts processes.