Business News

What is Making Tax Digital (MTD)? Carrington Accountancy preparing you for the changes

31/10/2018

Making Tax Digital or MTD is an initiative put together by HMRC to revolutionise the tax system. It is their aim that the UK has ‘one of the most digitally advanced tax administrations in the world’ and that the majority of the whole tax system, including self-assessments will become completely automated. The ‘new improved’ tax system will require the majority of businesses to maintain and submit digital records using compatible and approved software. Whilst it may well require short term changes and possibly some expense, over time it should result in your record keeping becoming more efficient. We will help you to secure these efficiency gains.

It’s true to say that HMRC have been less than efficient in the rollout of this initiative and it is only in the last couple of months that HMRC have finally confirmed the MTD timeline. The starting point for MTD submissions will be VAT.  From April 2019 HMRC will require all VAT registered businesses with a turnover in excess of £85,000 per annum, to submit fully compliant ‘MTD’ VAT Returns using some form of approved software.

We want to work with our clients and help them in deciding which software they wish to use. We want to be proactive in this now as April 2019 will soon come round. Many software companies have announced that they will be introducing MTD compliant accounts packages (about 150 at the last count) but as yet HMRC have not specified the finer details of what they want so final versions of the software are not available to the market, although there are some trial versions. The current options are as follows;

1. Move to a subscription based software package where you would subscribe directly to the software company. These are mainly cloud-based systems already in existence which will have an upgrade to comply with MTD. This is the higher cost option, with each software company setting their own price.
2. Use a HMRC approved VAT filing API (Application Programming Interface) which links to records kept on spreadsheets. This could mean new versions of spreadsheets – at the moment HMRC have not specified what will be needed. This would be cheaper and possibly free; we are currently looking into two different providers of API’s.
3. If you already use accounting software, check with Carrington or the software company that the software will be MTD compliant before April 2019. If it will be compliant, then you need to do nothing other than ensure you upgrade the software when required. If the software is not going to be MTD compliant, then you will need to switch to different software as per 1 or 2 above.

This is a major change for many businesses as only 11% are estimated to currently be using accounting software. HMRC have not promoted these changes to businesses at all well, so we, as your accountants, are here to make sure that you are aware of the decisions you need to make in the near future. We are here to ensure that Making Tax Digital doesn’t become Making Tax Difficult!

Carrington’s pro-active approach means that you will always get a heads-up as to what is happening. If your current accountant is not talking to you about MTD then talk to us. It is vital that all affected businesses are prepared for MTD and have the necessary processes and systems in place. Carrington Accountancy can advise on how to proceed in the best way for your business.