Sunday, 07 September 2014 00:00

An introduction to Making Tax Digital

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It’s only been a few months since the introduction of Making Tax Digital for the vast majority of VAT registered businesses - one of the biggest shake ups to the UK Tax system for many years.

There is still a lot of misinformation and misunderstanding about Making Tax Digital and it’s difficult to know where to go for a clear overview of the changes. So, it’s no surprise that many businesses, particularly SMEs and self-employed people, feel left in the dark about what it means for them. 

Like us, most accountants have been working with their own clients to get them ready for Making Tax Digital, and continue to support businesses with the transition. But as with any major change, there will be people who are unsure about the impact on their business.

Although the first wave of Making Tax Digital is initially focused on most VAT registered businesses, it’s going to affect almost all businesses in the future. That’s why, we’ll be lifting the lid on Making Tax Digital. We’ll be having an open discussion about the changes – looking at some of the unanswered questions, the challenges, and the not-so-obvious opportunities for your business.

 The basics – a quick refresher

 What is Making Tax Digital?   

It’s HMRC’s initiative to change the tax system and move it online. This means most businesses, self-employed professionals, and landlords need to maintain digital records and submit regular information to HMRC using compatible accounting software. It will

eventually see the end of the annual tax return.

 Who does it affect?

From April 2019, the first phase of Making Tax Digital was introduced for most businesses above the VAT threshold (currently £85,000). It will be introduced for other businesses from 2020.

 What does it mean for VAT businesses?

A business records and provides the same information as previously, but needs to keep records digitally and submit VAT returns using compatible software that communicates with HMRC’s systems.

 Does that mean you need a new system?

Businesses need to capture information digitally. This may require a new accountancy system, or ‘bridging software’ to translate the information you hold into the right format. There’s lots of choice on the market for compatible software, but it’s important to choose the most suitable system for the needs of your business.

 What do you need to do now?

If you haven’t done anything about Making Tax Digital yet, contact your accountant for advice – or feel free to get in touch with us. If you haven’t yet submitted a VAT return since the introduction of Making Tax Digital, you will have to soon and could face a penalty from the HMRC for not complying.

 Unsure about where to start? Speak to us about Making Tax Digital.  And look for our next blog which dispels some of the myths around what it means for businesses.

 Other resources

You can find out more from HMRC at https://www.gov.uk/guidance/help-and-support-for-making-tax-digital

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