If you run a business, you may be just as fed up with hearing about MTD (Making Tax Digital) as you were about Brexit. Despite this, there are thought to be around 300,000 businesses who still wrongly believe themselves to be MTD compliant!
So, what is Making Tax Digital, who does it affect, and why should your business be paying attention?
What should I know about Making Tax Digital?
The government are updating the UK tax system by moving it online, which affects the way that some businesses record and submit tax information. The new system is being rolled out in stages, starting with VAT before moving on to self-employed income tax and then Corporation Tax.
MTD doesn’t just mean digital record-keeping
Using MTD approved software to maintain financial records is only part of the requirement. Eligible businesses should also be using the software to submit their data to HMRC, but it seems that some are still using their Government Gateway account to submit their return.
MTD compliance is more than having software
Having the software alone doesn’t automatically mean compliance. Companies that have MTD compatible software also need to register for MTD through their business tax account. This linkup is what allows the data to be transmitted to HMRC.
But MTD software also means more than compliance
As well as avoiding the risk of serious penalties due to non-compliance, the accessibility of some MTD software can actually be invaluable. The real-time reporting functions and the ability to send invoices or process payments are becoming essential in businesses dealing with consumer expectations.
Is your business MTD compliant?
Rolling out MTD will be an ongoing process. VAT registered businesses with a taxable turnover above £85,000 have been obliged to keep records and file their VAT returns using MTD compatible software since their first VAT period starting on or after 1 April 2019.
HMRC might consider your application for exemption if:
- You cannot use computers, software, or the internet because of your age, a disability, or where you live
- You or your business are subject to an insolvency procedure
- Your business is run or staffed entirely by people who object to using computers on religious grounds
You do not need to apply for an exemption if you’re already exempt from filing VAT Returns online, or if your taxable turnover is below £85,000.
Apply for an exemption by calling or writing to HMRC. You will need to supply your VAT registration number, business name and address, details of how you currently file your VAT Return, and your proposed reason for exemption.
Double check your MTD compliance
- Software for MTD for VAT should be listed by HMRC.
- Check that your software account is connected to your HMRC account.
- Sign up for Making Tax Digital for VAT at least 72 hours before your VAT Return is due, or 7 days before if you pay by direct debit.
After you’ve signed up, you won’t be able to use VAT online services to send VAT Returns. The deadlines and frequency of your VAT Returns and payments will not change.