As we approach the date that GDPR comes into force, many businesses will be moving their focus to the next big challenge, that of Making Tax Digital (or MTD for short). An initiative devised by the UK government to make tax administration more efficient and easier for the average taxpayer to understand and complete, it will require the quarterly submission of tax related information through an online system. These changes will apply to a wide range of taxpayers from the majority of businesses (including micro businesses), to the self-employed, landlords and individual taxpayers, with each needing to integrate their accounts with online accounting software.
First announced back in the 2015 Spring Budget, MTD has been making headlines ever since, with its many consultations highlighting problems both with HMRC’s planning of the scheme and their proposed timings of implementation. At the outset, the date of full integration into the UK tax system was set for 2020, however after a number of trials and consultations the final date was amended. In July 2017 it was announced that only companies and persons earning over the VAT threshold will be required to keep digital records from April 2019, and then only of their VAT information. Businesses that are not VAT registered have a little longer to get their systems in place as they are now no longer required to keep digital records or update HMRC quarterly until April 2020.
The working process of MTD sounds very simple, on paper at least. Each taxpayer will have an individual digital account which will then be able to ‘collect’ the necessary data from a number of different sources such as payroll software and, further along the line, any bank interest, dividend payments and additional income such as from a rental property or self-employed projects. Taxpayers will then file their quarterly updates and the combination will allow HMRC to collect and process information relating to tax as close to real time as possible which will, in theory, help prevent mistakes and stop any overdue tax from building up. Researching the correct software for you and your business, along with detailed discussions with your accountant, will help you prepare your business’s systems and processes for Making Tax Digital. Making sure that these are in place prior to the deadline will not only help your business become more streamlined and allow you to solve any tech issues that may arise, but it could also help you save money.
Over the next few months we’ll be taking a closer look at Making Tax Digital, with posts looking at the impact of digital tax on individuals and businesses, outlining action points to help your business prepare, getting into the detail of just what HMRC needs to be reported, a specific post for VAT registered businesses and a look at what accounting software is on offer, including the pros and cons of cloud accounting. Follow us on social media to be notified of when these posts are published, you can find the links in our website header. If you would like any advice on Making Tax Digital, please just get in touch via firstname.lastname@example.org.