Making Tax Digital: Find out how it will affect you

We recently attended a seminar about Making Tax Digital (MTD), so thought it would be good to update you all on what is happening, so you can work out when you and your business will be affected.

Making Tax Digital for VAT registered businesses

For all businesses who are registered for VAT with turnover exceeding the VAT registration threshold of £85,000 MTD will take effect from April 2019. This means that VAT returns have to be submitted to HMRC using MTD compliant third-party software.

Submitting VAT returns via the government gateway will no longer be an option and if you are using spreadsheets to prepare the workings for your VAT returns you will need to use bridging software to submit your VAT returns.

First VAT return submission date using Making Tax Digital

The first VAT return that will need to be submitted for MTD purposes will be your business’s first VAT return starting after 1stApril 2019.

If a business submits VAT returns with quarters ending March, June, September and December the first VAT return under the new regime will be quarter ending 30thJune 2019.

If the VAT returns have quarters ending April, July, October and January, the first VAT return under the new regime will be quarter ending 31stJuly 2019.

‘Soft landing’ for Making Tax Digital

Digital reporting requirements will be relaxed for the first 12 months of MTD to allow businesses time to create the necessary digital links between their spreadsheets and bridging software. By April 2020 HMRC want to eliminate manual entry into the relevant boxes on VAT returns, corporation tax returns and most self-assessment returns.

Making Tax Digital requirements for all other businesses

With effect from April 2020 all businesses (limited companies, sole traders and partnerships) regardless of their income levels will have to report quarterly to HMRC via MTD compliant third-party software or, if using spreadsheets via bridging software.

The only group of people who will remain unaffected by MTD for the foreseeable future are individuals (i.e. employees under PAYE income only with no other sources of income). MTD for this group is currently on hold.

Making Tax Digital guidance

HMRC have provided a number of useful guidance documents to help you easily prepare for MTD:

If you have any questions about MTD or how it may affect your business, please get in touch. We will be more than happy to help.

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