Launching today, a new digital tax system is set to give over 1 million businesses more financial control…
From today, the government’s major Making Tax Digital programme becomes law for over one million VAT registered businesses earning over £85,000.
The new rules, first announced in 2015, will mean most businesses above the VAT threshold will need to keep their records digitally and submit their VAT return using MTD-compatible software for VAT periods starting on or after 1 April.
MTD will make it easier for businesses to get their tax right first time. HM Revenue and Customs (HMRC) has been urging businesses to get ready and has already written to every business affected with information on what they need to do.
Theresa Middleton, Director of the Making Tax Digital for Business Programme, said:
“Tens of thousands of businesses joined our pilot over the last 6 months and have helped us to test and improve the live service ensuring we have the right support in place to help people transition.
Now is the time for those businesses affected by MTD who haven’t done so already to begin preparing to switchover and start experiencing the benefits MTD has to offer. You don’t necessarily need to sign-up from day one, but you do need to make sure you’re keeping your records digitally for your next VAT period which starts on or after 1 April”
Nearly 100,000 businesses have already signed up to the new service. Over 4,000 businesses are now signing up to MTD every day to experience a more integrated approach to business and tax.
HMRC knows businesses will require time to become familiar with the new requirements. During the first year of VAT mandation, HMRC will take a light touch approach to penalties by not issuing filing or record keeping penalties where businesses are doing their best to comply with MTD.
Emma Jones, founder of small business support network Enterprise Nation, said:
“Encouraging small firms to adopt more digital functionality offers real benefits. For example, having accurate and timely financial information to hand helps companies make better, more informed decisions and using digital tools more broadly, including time management, helps businesses increase productivity. In the longer term we feel Making Tax Digital and the digitisation of tax records will present significant advantages to business.”
What do businesses need to do now?
If you have not prepared, do not panic. April 1st is not a cliff edge for sign-ups – the first returns under the new system for the majority of businesses, who file VAT quarterly, won’t be due until August at the earliest.
Accountants or other tax representatives will already be aware of MTD and will advise businesses how and when they need to make changes to be ready for the new service.
Those already using software will simply need to ensure it’s MTD-compatible then sign up to the new service and authorise their software for MTD.
For those who are not using an accountant or don’t currently use software, it is quick and easy to sign up and there is lots of information available to help them prepare, including about what software is available.
- Take steps to find out if your business is affected by the Making Tax Digital changes and what you need to do if it is. Most businesses above the VAT threshold have to start keeping their records digitally and sending their VAT return to HMRC direct from their software for VAT periods starting on or after 1 April.
- Talk to your accountant or agent – if you use one to manage your VAT affairs – about how they are making returns MTD-compliant.
- Speak to your software provider if you already use software to ensure it will be compatible.
- Those businesses that are either not represented by an accountant and/or do not already use software will need to select software to use and sign up to MTD, then authorise their new software for MTD. Our GOV.UK webpages provide information on a wide variety of products, from free software for businesses with more straightforward tax affairs, to increasingly sophisticated paid solutions. There are also products that can be used in conjunction with a spreadsheet for those businesses that don’t want to change their underlying record keeping system.
The Making Tax Digital myth buster is here