May 1st 2019
This new initiative has had it’s fair share of exposure, yet what is ‘Making Tax Digital’ exactly?
By now, whether on the radio, in the newspaper, or even on the TV, you’ve probably heard the term ‘Making Tax Digital’ mentioned. This new government initiative has had it’s fair share of exposure, yet what is ‘Making Tax Digital’ exactly? Do you need to worry about it? And if so, how might it imapct your business?
What is ‘Making Tax Digital’?
According to gov.uk, “”Making Tax Digital is a key part of the government’s plans to make it easier for individuals and businesses to get their tax right and keep on top of their affairs””. But essentially it means that the way the tax system works is changing with the aim of making it easier for taxpayers to get their tax right. VAT registered businesses will now be required to keep track of their finances through an MTD compliant software package (such as Xero, Quickbooks, Sage 50Cloud, Sage Business Cloud Accounting etc), and submit their VAT returns to HMRC digitally.
Why is it being implemented?
As business owners, we all want to get our tax returns right (after all, none of us want those pesky brown envelopes through the post do we!). Yet it’s clear that for too long, this simply has easier said than done, with ‘avoidable mistakes’ costing the Exchequer over £9 billion a year. Recording our records digitally, along with the support of the new software products available to manage this for us, will help business owners to avoid unnecessary errors, and reduce the amount of tax lost to mistakes.
Do you need to worry about it?
In order to help small businesses, the government announced in July 2017 that Making Tax Digital will not be mandated for taxes other than VAT until at least April 2020. It was also announced in March (2019) that businesses will be supported in the transition, therefore the Government won’t be mandating Making Tax Digital for any new taxes or businesses in 2020.
So if your business is currently under the £85k turnover per annum threshold, then you don’t need to worry about submitting your returns digitally just yet, and you can instead continue to submit your accounts via the HMRC portal as in previous years.
Yet if your business is operating above the £85k threshold, then any VAT periods beginning on or after the 1st of April 2019 will need to be submitted through the new Making Tax Digital system.
And how might it impact your business?
If you need to make changes to your business to comply with the new Making Tax Digital legislation, then you will need to use compliant software to link your records to HMRC. As stated above these software providers include Xero, Quickbooks, Sage 50Cloud, Sage Business Cloud Accounting.
For more information on Making Tax Digital, please do give the Marele Accountancy team a call on 01202 313674, or see the gov.uk website article here.