From 1 April 2019, the vast majority of Britain’s businesses will need to keep their records digitally and submit their VAT return using software compatible with the Making Tax Digital (MTD) programme, HMRC’s mandated VAT returns and business records digitisation project.
(This is a key component of what HMRC describes as its “ambition is to become one of the most digitally advanced tax administrations in the world.”)
Currently 2,000 businesses a day are signing up to MTD, with HMRC reporting that so far nearly 30,000 business have already signed up to the new service. However, over a million businesses still have to be on-boarded to the MTD programme, the government acknowledged today.
HMRC says the new system will reduce the time companies spend on administration and will raise the overall accuracy of tax reporting.
Mel Stride, Financial Secretary to the Treasury said today: “It has never been more important for businesses to be able to seize the opportunities that digital technology offers. Making Tax Digital helps…businesses to get their tax right first time by transforming how they keep their records and send information to HMRC.”
“It will give businesses more control over their finances, allowing them to spend time focusing on innovation, growth and the creation of jobs.”
Making Tax Digital If you Don’t Have Accountancy Software You Need it
Enterprises using accountancy software to process their taxes and VAT returns may still need to consult with their respected software providers and find out if it is compatible with the scheme.
If a business is not currently using any type of accountancy software they will have to select a software or a service provider in order for them to be able to sign up to MTD.
Theresa Middleton Director of the Making Tax Digital for Business Programme commented that: “There are over 160 software products for businesses to choose from with a range of prices, including some that are free, offering different levels of functionality to suit every business. It’s time to get on board and join the thousands of businesses already experiencing the benefits of MTD.”
HMRC says it has contacted every businesses that’s ‘mandated’ to digitalise their VAT records. The department says it will take a softly-softly approach initially.
“HMRC recognises that businesses will require time to become familiar with the new requirements of MTD. HMRC has been clear that during the first year of mandation, it will take a light touch approach to digital record keeping and filing penalties where businesses are doing their best to comply with the law. But this does not mean a blanket ‘no penalties promise’.”