MTD (Making Tax Digital) is an HMRC initiative designed to take advantage of technology to make tax administration easier for taxpayers (and HMRC). After delays and false starts MTD is happening now.
VAT regulated businesses with turnover above the VAT threshold (currently £85,000 pa) were brought into phase one of the MTD scheme from April 1. VAT accounts information must be kept using software, designated by HMRC as MTD compliant. HMRC’s current ability to accept VAT returns online will no longer operate, and returns will need to be submitted via MTD compliant software.
VAT regulated business with turnover below the VAT threshold (optionally registered businesses) will be brought into the MTD scheme under phase 2 from April 2020. The same need for compliant software and returns will apply as for larger businesses.
After 2020, and undoubtedly depending on the success of the first phases of MTD, HMRC will consider timings for introduction of MTD to non-VAT registered entities, sole traders, partnerships, landlords, and trading companies.
MTD may mean that non-businesses and landlord clients are moved out of self assessment in tranches dependant upon their size, portfolio, or annual income. In due course these will become personal tax accounts, with data updated directly via software, and combined with information received directly by HMRC from banks and other sources of financial data.
At MMP we regularly advise our clients on their MTD strategies. Through a new partnership with QuickBooks we have special access to the tools you need to be MTD-VAT ready.