What is Making Tax Digital?
Making Tax Digital (MTD) is a key part of the British 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.
As of April 2019, MTD mandates businesses with a taxable turnover above the VAT threshold of £85,000 to keep digital records of their transactions and submit their VAT returns electronically using a MTD compatible accounting software.
HMRC’s new policies are designed to save time, reduce errors and cut the risk of penalties – so it’s good news for business in the long run.
Who is affected?
The current situation for MTD for businesses is:
- Most businesses with a turnover above the VAT threshold – currently £85,000 – are affected from April 2019, if they pay VAT.
- Businesses will not be asked to keep digital records or update HMRC quarterly for other taxes until at least April 2020. At present HMRC hasn’t shared any further details.
- Niche and more complex businesses or organisations – around 3.5% of the total – have a postponed MTD for VAT start date of October 2019.
Will there be any penalty?
Keep in mind that if your business does not comply with MTD you will get a penalty. The specific details of how the penalty regime for MTD will work is under consultation and options include a points-based penalty system where an accumulation of points will incur a monetary charge. Existing penalties for late submission or error will apply.
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