Making Tax Digital

Making Tax Digital marks the biggest change to the UK tax system in a generation and here at Botting & Co we believe that it will ultimately enable businesses to be more efficient and effective longer-term.

What is it?
Making tax digital is as it sounds. Instead of endless Excel spreadsheets, tax returns are digitalised and it marks the end of the annual tax return for (some) small businesses.

HMRC says the benefits are ‘significant’ and businesses do not need to give HMRC information it already holds or is able to get elsewhere. This includes data from employers, banks, building societies and other government departments.

Customers can see the information that HMRC holds and they can check at any time that their details are correct.

When does it come into effect?
Small businesses have been hamstrung by various changes to regulations in recent years. The new pound coin, for instance, and its impact on lockers, trollies, meters et al. When making tax digital was first announced, companies pointed this out and the Government changed the deadline.

All VAT registered businesses over the VAT threshold must make the move to digitalised returns by April 2019. HMRC are withdrawing the web based service and consequently it will not be possible to file VAT returns without MTD compliant software.

What your business needs to think about
The HMRC reports it loses more than £8 million a year due to avoidable tax mistakes, which is a good reason for reformation of the existing system with effectiveness and efficiency being the goal.

A modern digitalised system will help avoid errors and, the Government says, reduces costs for businesses too.

Many businesses already provide their information electronically. Making tax digital may also mean filing returns quarterly, which means more work in the short-term, but eventually, the impact will be minimal and you will have a much clearer picture of how much you owe and when.

From April 2019, businesses that are VAT-registered and have a turnover above the threshold will need to keep digital records. The software must be compatible with the systems the HMRC uses.

Records will need to show:

  • The business name, purpose and the VAT registration number
  • The VAT account showing the audit trail between main records and the VAT return

You will also need to keep records for six years.

If you are an individual or a landlord filling in self-assessment (SA) forms, the VAT threshold rule still applies. An SA form asks people to supply info already held by the HMRC. Digitalisation will join up internal systems to stop this. If the HMRC can use third-party information (data provided by someone other than customers or their agents), this makes it easier for people to report their income and reduce mistakes.

In other words, you are more likely pay the right amount you owe.

HMRC promises the system is being fully tested. When it is rolled out across all businesses, it should be the best version of itself.

How can Botting and Co help?
Tax rules and regulations are our speciality. If you want help to make the move to digital tax returns, please contact us today on 01903 713508.

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