What does Making Tax Digital (MTD) mean?
MTD is a new system initiated by HMRC which serves as a digital platform for all business owners and individuals to submit taxes, requiring an increased frequency to file returns.
Digitalization has become the need of the hour as it becomes a global phenomenon, hence the government is methodically switching to changing the way taxes are recorded and submitted to HMRC.
Making tax digital (MTD) will be implemented in a stepwise manner, where in phase one VAT registered entities will be submitted as of 1st April 2019 and subsequently other taxes will be included.
Hence for businesses for all sizes it has become essential to stay on track with MTD.
MTD is Applicable to:
- All Vat registered businesses with a turnover of £85,000 and above with effect from 1st April 2019
- Applicable to Sole traders, companies, LLPs, partnerships, and charities
- All VAT registered entities with a turnover less than £85,000, have an option to file VAT information as per MTD, if they wish to do so
Important Information regarding MTD
|Applicable from||1st April 2019|
|Software||Individuals/companies will need to purchase software from third party for MTD for VAT|
|Requirements||HMRC requires the following information |
2.Place of business
3.VAT registration number
4.Information about supplies
HMRC does not require digital storage of preliminary invoices and receipts. However paper and digital records are required to be kept for six years at least.
|Monthly Returns||MTD will facilitate businesses by increasing frequency of returns i.e. from quarterly to monthly basis.|
|Flat rate VAT||No restrictions for businesses with flat rate VAT scheme|
|Exemptions||VAT registered Businesses with a threshold less than £85,000, are exempted from MTD|
Advantages of MTD
MTD is different from traditional method of record keeping, hence as specified earlier, businesses will require a third party software to maintain records as per requirements of MTD. This poses to be an added administrative burden on the businesses.
However, compliance with making tax digital offer long-term benefits which include:
- Increased frequency of submission of returns (from quarterly to monthly) with real-time information
- Real-time information leading to an efficient business and taxation)
Once the initial steps of planning and processing are executed, and the software is up and running, it will not only help reduce errors but also save precious time.
Companies who have already procured third-party softwares will need to check if they are in compliance with the Making Tax Digital requirement.
How can CWI Accountants help you?
At CWI accountants, we aim to make this process of transition into MTD a smooth one for our prestigious clients, keeping in mind the unique requirements of different businesses.
To further facilitate our clients, we have partnered with softwares that are in full compliance with MTD