1. What is Making Tax Digital?
Making Tax Digital (MTD) is a key part of the government’s plans to make it easier for individuals and businesses to get their tax right and keep on top of their affairs as well as transforming HM Revenue and Customs (HMRC) into a world leading, digital tax authority.
This is one part of a vital journey the UK needs to take to tackle low productivity and improve the business environment for SMEs, the backbone of the British economy.
On the 13th July 2017, HM Treasury and HMRC published its second Finance Bill of 2017, which included changes to MTD.
The changes to MTD now mean that:
• Only businesses with a turnover above the VAT threshold – currently £85,000 – will have to keep digital records and only for VAT purposes
• They will only need to do so from April 2019
• Businesses will not be asked to keep digital records or update HMRC quarterly for other taxes until at least April 2020
On the 28th February 2018 new secondary legislation was enacted (SI 261/2018: The Value Added Tax (Amendment) Regulations 2018) to implement the revised MTD requirements.
The new rules mandate that VAT registered businesses with a taxable turnover above the VAT registration threshold must from the 1st April 2019:
• Keep records in a digital form; and
• File their VAT returns via MTD enabled software
HMRC’s latest draft MTD VAT notice states that, whilst the complete set of digital records to meet MTD requirements do not all have to held be in one place or program, there must be a digital link between these pieces of software used.
Once finalised this section of the draft VAT notice will be given force of law and will therefore be a mandatory requirement. The rule applies to VAT periods starting on or after 1 April 2020.