Making Tax Digital (known as MTD) is the biggest shake up of the way everyone (including businesses) will need to start reporting to HMRC.
MTD is being introduced over the coming years but kicked off in April 2019 with MTD for VAT - which is now live.
HMRC's plan is to follow this with MTD for Income tax and then MTD for Corporation Tax over the next couple of years.
In essence, MTD means recording all your activity electronically, then reporting it to HMRC more regularly and electronically. The days of keeping paper and completing HMRC forms manually are soon to disappear.
We have been following the MTD journey since the start and our Clients are all MTD compliant. We do it all for them!
Since 1 April 2019, the vast majority of VAT-registered businesses with a taxable turnover above the VAT threshold (£85,000) have been required to keep their VAT business records digitally and submit their VAT returns using MTD-compatible software.
We have ensured all our Clients are compatible and we submit their VAT returns for them using HMRC approved software.
Under the MTD for VAT rules, for periods starting on or after 1 April 2020 (or 1 October 2020 for deferred businesses) digital links must be in place for any transfer or exchange of data between software programs, products or applications used.
In practice, this means no more manual rekeying, or copy/pasting from your salon or barbershop POS system into and out of excel upload templates (which most businesses and their accountants rely on at the moment)!
When it is introduced (thought to be after 2020) businesses and landlords who join MTD for Income Tax will need to send quarterly summaries of their income and expenses to HMRC using MTD-compatible software.
In response they will receive an estimated tax calculation based on the information provided to help them budget for their tax.
Similar to MTD for Income Tax, Ltd Companies will be required to ensure they are also MTD compliant.
We continue to follow the MTD story and keep our Clients up to date on it!