Making Tax Digital

On 13/07/18 HMRC published what we believe will be the final details for the introduction of Making Tax Digital (MTD) on 05/04/19.

There have been numerous drafts and rule changes since this was announced by Chancellor George Osborne in his Summer Budget of 2015. It was initially envisaged that these rules would apply to anyone with income over £10,000 outside the PAYE system. Additionally it was intended that all taxpayers would have to purchase software from commercial vendors at their cost. HMRC felt that the commercial suppliers could supply some software for free! Additionally limited companies were not included in the original details. The rules in brief now state the following;

  • All businesses with taxable turnover above the VAT registration threshold (£85,000) need to comply with the rules.
  • The rules apply from the date of your first VAT quarter starting on or after 01/04/19.
  • Digital records must be kept by the business in question.
  • There is some flexibility via bridging software.
  • There will be penalties for failing to comply.

There are some exemptions available for age, digital exclusion or religious grounds. HMRC do not expect these exemptions to apply to many businesses.

Where you are already using software to record your transactions and submit your VAT returns it is expected that these software providers will amend their software by next April to enable you to comply with MTD. The only change will be that instead of the software submitting the nine figures that go onto the return it will submit the full history of every entry in that quarter. There are clear risks involved with this as HMRC may arrive at a range of conclusions, some accurate and some inaccurate, based on the date they receive. Either way it is the intention to use this data to make more targeted enquiries the result of which will be a cost to the business.

For those not using software but simply recording software on a spreadsheet there is the option of bridging software. Our current provider is confident that they will have a solutions for this to enable us to “convert” your spreadsheet for submission to HMRC. Naturally there will be a cost for this that we can provide once we have a solution in place.

For those keeping paper records unfortunately there is a requirement to change to a digital solution.

For those in the last two categories we are happy to provide assistance to move to a software provider that will enable them to comply with the new rules when they are implemented. We are also happy to run through the alternatives.

HMRC have said that as long as you are attempting to comply with the rules they will not issue penalties within the first year of MTD.