Making sense of Making Tax Digital
Making Tax Digital (or “MTD”) is the biggest change in tax administration in recent years and will affect every business in the UK. Under MTD businesses will be required to maintain digital accounting records and to use these to submit returns to HMRC. The initial focus will be on VAT but this is expected to expand to other taxes in the future.
Who does MTD apply to and when does it start?
MTD will initially apply to all businesses with turnover greater than the £85,000 VAT threshold. The commencement date for submission of VAT returns under MTD is 1 April 2019. HMRC has plans for MTD to be expanded to require businesses to submit income and expense reports on a quarterly basis – this will not be until 1 April 2020 at the earliest.
What are digital records?
A digital record is a record of data for each transaction of the business. HMRC are aware that many businesses currently use spreadsheets to record their data and have confirmed that this will be an acceptable form of digital record provided it is in an MTD compliant format. However, while this may satisfy the initial requirements it is likely that as MTD expands that most businesses will be required to invest in more comprehensive third party software.
How does this impact on businesses?
If businesses are already use accounting software that is or will be ‘MTD compliant’ then they will not need to undertake any further action. However this will not be the case for many businesses where software may not be compliant, manual adjustments are required or there are more complex accounting systems in place.
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Unfortunately, there will be a cost to tax payers and increased pressure on both advisors and clients to meet the new reporting requirements. However, the changes will help to improve the quality of record-keeping for businesses, reducing the likelihood of mistakes and help businesses to manage their affairs more effectively and on a timely basis.
How can ASM help?
ASM Chartered Accountants have a range of solutions for dealing with the transition to MTD and have invested in a range of MTD compliant software that can be used by businesses of all sizes and complexities. These solutions can be tailored to your business’s needs and with offices in Belfast, Newry, Magherafelt and Dungannon we are close at hand to help you to make the smooth transition to digital accounting.