Making Tax Digital (MTD) is a new requirement by HMRC for businesses to keep digital records and submit tax returns online. To do this, you’ll need compatible software to make it happen. There’s more on that here. And it all begins on 1 April 2019.
You might be thinking, “Why all the fuss?”. But HMRC sees MTD as a big antidote to our ginormous tax gap. Our tax gap, which is the amount HMRC estimates it doesn’t receive despite expecting it, is currently £25bn. And out of this, HMRC predicts £9bn is down to simple, honest mistakes within people’s VAT returns.
When does Making Tax Digital start?
After consulting with lots of businesses, in July 2017, HMRC decided there’d be delays for corporation tax and income tax until at least 2020. However, HMRC decided to keep the original deadline for VAT returns. So, for now, submitting your VAT returns online is what you need to worry about.
When will it start? MTD will go live from 1 April 2019. Your business is required to file from the first return starting on or after 1st April 2019.
Since the original announcement, HMRC has introduced a couple of things worth knowing about. One is the VAT compatible software list. Here, you can find out whether the software you use is already compatible to use to submit your returns online. We recommend you read our article too for more information on the types of software to help you and your business.
The second update is that some organisations such as trusts and not for profits have been granted a deferral – a little longer to get things in order. The new deadline for these organisations is 1 October 2019. If you think this might be relevant to you, find the list here.
Making tax digital timetable
Here’s the timetable as it stands. And as we mentioned above, some organisations have been granted an extension.
It might seem like a big upheaval. But if Making Tax Digital is a success, HMRC predicts the UK will have “the most advanced tax system in the world”.
First things first, we think you should check to see if the software you’re using is compatible for Making Tax Digital. Then, it’s likely you’ll have a decision to make on what software to choose and how to go about submitting your returns. But after that, it should be simple.