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What is Making Tax Digital? - Dec 2018 update

As you may be aware, from 1 April 2019 HM Revenue & Customs ‘Making Tax Digital’ legislation goes live in the UK. Making Tax Digital (MTD) is one of the biggest changes to the administration of the tax system for at least 20 years.

The essential elements of MTD for businesses and organisations are:

  • Paper records will no longer be sufficient: it will become mandatory for almost all businesses and organisations (self-employed, partnerships, limited companies and others) to use software or a spreadsheet to keep accounting records. Paper accounting records will cease to meet the requirements of tax law.
  • Returns and quarterly reporting: there will be a requirement to submit VAT returns and income tax updates (quarterly and annually) to HMRC, directly from software.

When does it start?

The first MTD requirements begin with VAT. Digital VAT Returns will be required for VAT quarters beginning on or after 1 April 2019. There will be no change in the frequency of the Returns, or changes to the reporting periods, just a change to the way in which the information must be stored and how VAT Returns are submitted to HM Revenue & Customs (HMRC).

How does this affect you?

If your business is registered for VAT and your turnover is above the VAT threshold you will be required to keep digital accounting records and to file your VAT returns using MTD compliant softwarefrom April 2019.

If you currently use accounting software, it may need to be upgraded.

If you currently maintain records on a spreadsheet you will need to acquire software which will allow returns and updates to be made directly from the spreadsheets.

If you currently maintain records on paper, your processes will need to change. There are a number of solutions available to you in terms of accounting software. We understand that this change may be daunting, but we are here to help you and discuss the options available to you.

What are the next steps?

Although beginning with VAT, MTD is expected to also become mandatory  for income tax reporting, but not before 2020. This will include all self-employed individuals, partnerships, trusts and landlords who complete self-assessment tax returns.

The timings for MTD for corporation tax have yet to be confirmed but it will not become mandatory before April 2020.

For up to date information, videos and articles regarding MTD, please visit our MTD webpage:

If you would like to discuss MTD further, then please do not hesitate to get in touch.

Rothmans are Xero Gold Members, Intuit QuickBooks Platinum Pro Advisors and Sage Accountant Partners. Therefore, we are in a great position to assist you with MTD.

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