UHY Hacker Young | Chartered Accountants

Making Tax Digital

Frequently Asked Questions

What is Making Tax Digital?

MTD is a key part of the government’s plans to make it easier for businesses to get their tax right and keep on top of their tax affairs. HMRC’s ambition is to be one of the most digitally-advanced tax administrations in the world, modernising the tax system to make it more effective, more efficient and easier for customers to comply.

Businesses need to keep digital records and use compatible software to send their VAT returns or Income Tax updates to HMRC, and to receive information.

Keeping digital records and providing updates to HMRC directly through MTD-compatible software will help reduce errors, cost, uncertainty and worry.

This streamlined digital experience will integrate tax into day-to-day business record-keeping so that businesses can view their tax position in-year and be confident that they have got their taxes right.

When will MTD for VAT be mandatory for my business?

All VAT registered businesses with a taxable turnover above the VAT threshold (Currently £85,000) will have to join MTD for VAT from 1 April 2019. This is mandatory for VAT return periods that start on or after 1 April 2019.

What do businesses need to do to be ready to sign up for MTD?

You must start keeping your business records digitally before you can sign up for MTD. If you already use software to keep your business records, check with your software provider to see what their plans are. All mainstream cloud packages (FreeAgent, Sage business cloud, QuickBooks & Xero) will be MTD compatible.

Sage 50 desktop users have a range of options, with the recommended route being to move to Sage 50cloud, or Sage business cloud for smaller businesses.

If you don’t use software just now, or your software won’t be MTD-compatible, then your business needs to consider what software, or bridging software, is most suitable for you. As a general rule, it is best to use cloud accounting software if not already doing this. We will contact you individually throughout February 2019, to discuss the available options.

Benefits of using cloud accounting software?

Not sure what cloud software is? The cloud is a platform to make data and software accessible online anytime, anywhere, from any device. Your hard drive is no longer the central hub. Every time you access this data, you’re using the cloud.

This means you can see live finance data at any time. From knowing your business’s tax liabilities, understanding the organisation’s cashflow, to knowing what customers still owe you money. Not sure what system to best use, then read here to find out more.

What if we do your businesses bookkeeping?

We are here to assist with this, and we will suggest what MTD-compatible software you could use for your business. In many cases, this will mean a move to a cloud accounting package, where you can take advantage of being in the ‘cloud’.

How will submissions of VAT returns change?

Businesses within the scope of MTD for VAT will be required to send their VAT returns to HMRC using MTD-compatible software. They will no longer be able to submit VAT returns using the HMRC portal.

If you already record business transactions digitally, and then file using HMRC’s online service using MTD-compatible software will speed up the submissions process and reduce the likelihood of errors, especially transposition errors.

What records do businesses need to keep digitally for MTD?

MTD does not require businesses to keep additional records for VAT, but to record them digitally.

Your digital records should include, for each supply, the time of supply (tax point), the value of the supply (net excluding VAT) and the rate of VAT charged.

They should also include information about the business, including business name and principal business address as well as your VAT Registration Number and details of any VAT accounting schemes you use.

Customers who currently record daily totals can continue to do so, but they have to be captured digitally.

If you use spreadsheets to keep business records, you’ll need MTD-compatible software so that you can send HMRC your quarterly VAT returns and receive information back from HMRC. Bridging software may be required to make spreadsheets MTD-compatible.