What is making tax digital?
HMRC has announced a new initiative to bring taxpayers online. The idea is to try and make the management of tax easier and more efficient.
The rollout begins on 1 April when Making Tax Digital (MTD) will come into effect for businesses that are VAT-registered above the £85k threshold. These businesses will then need to use MTD compatible software to record their VAT and file their returns online.
What software is compatible?
HMRC have published a list of compatible software here
If you would like to talk about moving to a compatible cloud based software, please do let us know. We can advise on the best software for your needs including Sage Business Cloud and Xero.
What if I’m not above the threshold?
HMRC have published a notice which includes examples for businesses over, close to and below the threshold to indicate when they need to become complient. The below examples are an excerpt from this notice.
Example 1: existing business with taxable turnover above the VAT registration threshold on 1 April 2019
A business submits a quarterly return covering the period 1 March to 31 May 2019. The business taxable turnover exceeds the VAT registration threshold and therefore the business will need to comply with Making Tax Digital rules for the period starting 1 June 2019.
Example 2: business with a taxable turnover above the Making Tax Digital threshold at the point it needs to register for VAT
A business that is not registered for VAT is required to register from September 2019 because the taxable turnover over the previous 12 months has exceeded the VAT registration threshold. The business must follow the rules in this notice for all VAT returns that it is subsequently required to make as its taxable turnover was above the VAT threshold when it was required to register.
Example 3: VAT-registered business with taxable turnover below Making Tax Digital threshold until November 2019
A business is registered for VAT but its taxable turnover is below the VAT registration threshold until November 2019. The business must follow the rules in this notice for any VAT period that starts on or after 1 December 2019 as its taxable turnover now exceeds the VAT registration threshold.
