What is Making Tax Digital (MTD)?
Making Tax Digital is a government initiative to make the UK tax system more digitally advanced by requiring businesses and landlords to keep their records in a digital format.
The government states that over £9 billion is lost to the exchequer each year due to avoidable mistakes. They believe the use of digital software products will improve accuracy as well as being more effective, efficient and easier for the tax payer.
So what is Making Tax Digital for VAT?
The first phase of MTD begins on 1st April 2019 with MTD for VAT. From this date all VAT registered businesses with a taxable turnover above £85K will be required to keep digital records and to submit their VAT return using MTD compliant software. The government portal will no longer be available to file VAT returns direct for businesses within the MTD for VAT regime.
What MTD Compliant Software is available?
HMRC have published a list of all software it considers to be MTD compliant. You can view it here: https://www.tax.service.gov.uk/making-tax-digital-software
Software solutions are available from Xero, Freeagent, Sage and Quickbooks as well as many others.
Businesses wishing to continue to use spreadsheets will be able to but will need to use a bridging software solution to file their VAT return.
What is next for Making Tax Digital?
The next phase of Making Tax Digital for Business will involve Income Tax and Corporation Tax however after listening to feedback from small business and Accountancy Professional Bodies the government announced in the Spring Statement that this phase would be delayed until April 2021 at the earliest.