Financial and Accounting businesses are being invited by HMRC to ditch their paper receipts and join the digital revolution by testing the new digital tax service – Making Tax Digital.
A recent cross-business sector poll by YouGov revealed that found that 24 per cent of businesses spend around 10 hours a week on administration, including tax. It even revealed that the financial and accounting sector came out tops as the most likely workers to lose receipts, train tickets, plane tickets – and even a date’s phone number!
Moving tax affairs on-line through Making Tax Digital (MTD) could cut these admin tasks in half, leaving people with more time to concentrate on their core work, even if it can’t give guarantees about romance.
Most businesses above the VAT threshold (£85,000) will need to keep their records digitally and submit their VAT return using MTD software starting on or after 1 April 2019. VAT registered businesses with a taxable turnover below the VAT threshold are also being invited to join voluntarily the MTD revolution.
In reality, for most the first return under MTD won’t be until August or later. But HMRC are encouraging businesses to get involved early by getting software and starting to test the service now. That way businesses will know what they need to do before the deadline and HMRC can work with them on any teething issues.
For most businesses their accountant will already be aware and will advise them how and when they need to make changes to be ready to adopt the new service. Those already using software will need to ensure it is MTD compatible before joining the new service.
A small group of more complex businesses have an extra six months before they are required to use the service. The pilot for this group opens in the spring so they will be able to try the service before they are mandated to use it from 1 October. No business will be forced to go digital for their VAT returns if they are unable to. Anyone who is already exempt from online filing of VAT will remain so under MTD and there is a process to apply for an exemption due to factors such as age, disability, location or religion.
Mel Stride, Financial Secretary to the Treasury, said digital tax was a major step that business could take to get more control over their finances. He said: “Anything that helps businesses to manage their tax more easily so they can focus on what they do best – innovate, expand, and create jobs and profits – is what every modern business needs. In a world where customers and suppliers are already banking, paying bills and shopping on-line, it makes sense for HMRC and businesses to bring tax affairs fully into the 21st century.”
Theresa Middleton, Director of the Making Tax Digital for Business Programme, is encouraging all business sectors to get ahead of the curve and sign up for the pilot. She said: “There is no change to ‘what’ information is provided through MTD, just ‘how’ it is generated and provided. We want to help businesses be ready for the changes which kick in from April – they must start preparing now. More than 11,000 businesses have already signed up to do their VAT digitally – why not join them?”
What businesses need to do?
- Take steps to find out if your business is affected by the Making Tax Digital changes and what you need to do if it is. Most businesses above the VAT threshold have to start keeping their records digitally and sending their VAT return to HMRC direct from their software for VAT periods starting on or after 1 April.
- Talk to your accountant or other agent – if you use one to manage your tax affairs – about how they are making returns Making Tax Digital compliant by 2019
- Speak to your software provider if you already use software to ensure it will be compatible.
- Those businesses who are either not represented by an accountant and/or do not already use software will need to select software to use and sign-up to MTD. Our GOV.UK webpages provide information on a wide variety of products, from free software for businesses with more straightforward tax affairs, to increasingly sophisticated paid solutions. There are also products that can be used in conjunction with a spreadsheet for those businesses who don’t want to change their underlying record keeping system.
- If you are an agent you will need to sign up for an Agent Services Account.
- There is an easy to use guide for businesses, agents and others including easy-to-follow advice, which is available here.
- A VAT Notice has been published explaining the rules for Making Tax Digital for VAT and about the digital information that must be kept.
- Engaging with our webinars and videos for Making Tax Digital, which are available here.