Making Tax Digital (MTD) is an HMRC initiative that requires UK businesses to submit their tax returns and payments online, while also keeping digital records of their taxes. It will be mandatory from 1st April 2019.
This is a significant change from today’s processes, which sees the majority of UK businesses manually re-keying their VAT returns into HMRC’s online portal.
HMRC says the new initiative has been designed to help promote ease and efficiency within the UK tax system and concludes that: “The move to digital integration will eliminate many of the existing paper-based processes, allowing businesses and their agents to devote more time and attention to maximizing business opportunities, encouraging growth and fostering good financial planning.”
MTD will be mandatory from 1st April 2019 for all VAT registered businesses that have a taxable turnover above the registration threshold of £85,000. Businesses that don’t yet meet this threshold won’t have to operate digitally, however, can still choose to do so voluntarily.
Currently, this deadline only refers to VAT returns, however, there are plans to roll-out similar digitalization across Income Tax and Corporate Tax as well. The HMRC have announced that these secondary roll-outs won’t be until April 2020 at the earliest though.
What does Making Tax Digital mean for you?
There are three important components of the Making Tax Digital initiative, which are:
- Digital Records: Your transaction data will need to be stored digitally, and there are certain stipulations put forward by the HMRC on what details you’ll need to store.
- Digital Links: Your VAT returns must have ‘digital links’ to digital records. VAT Notice 700/22 includes examples of where a digital link is required and how you might use one.
- Digital Submission: All VAT returns will need to be submitted digitally via HMRC’s Making Tax Digital API.
You can learn more about what is expected from the HMRC and how this is likely to affect you in their official VAT Notice.
What is Brightpearl doing in response to MTD?
Richard Rattlidge, one of our Product Managers, who is responsible for several of our largest product features including Accounting and Automation, has provided insight below on what we have planned to support this new legislation:
“From April 2019, businesses in the UK above the VAT threshold will be mandated to keep their records digitally and provide regular updates to HMRC. Initially, they require that VAT Returns are sent directly from accounting platforms to HMRC.
As an accounting platform producing VAT returns, we will be providing our UK-based customers with a tool to send these returns to HMRC digitally. We’re currently working on this feature and will have it ready before it’s required by HMRC in April 2019.
The tool will allow you to send your VAT return contents directly from within the app with a simple click (after authorizing and setting up the app).”
For more information on exactly what the HMRC are changing, take a look at these Government resources below:
- VAT Notice 700/22: Making Tax Digital for VAT
- Making Tax Digital for Business: Stakeholder Communications Pack
Make sure you also keep an eye out for our feature release notes as we get closer to April for more details on what the new MTD tool in Brightpearl will look like and how it will function.
If you have any questions on this and our plans to support Making Tax Digital, please feel free to comment on this blog post below, or message us on social: