Making Tax Digital is a key part of the government's plans to modernise the UK tax system.
HMRC's ambition is to become one of the most digitally advanced tax administrations in the world, and Making Tax Digital will help transform the tax system.
All VAT registered businesses with a taxable turnover above the VAT threshold are required to use the Making Tax Digital service and keep records digitally by use of software to submit their VAT returns from 01 April 2019. However, the government have announced that there will be a 6 month deferral until 01 October 2019 which applies to the following VAT registered entities:
- 'not for profit' organisations that are not set up as a company;
- VAT divisions;
- VAT groups;
- public sector entities required to provide additional information;
- local authorities;
- public corporations;
- traders based overseas;
- those required to make payments on account; and
- annual accounting scheme users.
The government has yet to define these terms in any detail, therefore those affected should check their position.
With less than 5 months until Making Tax Digital becomes mandatory for a large number of businesses, a recent survey has found that approximately 41% of small business owners are still unaware of Making Tax Digital.
It is intended that Making Tax Digital will make tax administration more effective, efficient and easier for taxpayers. Making Tax Digital will require the majority of business owners to maintain digital records using compatible software.
Therefore, if your business is required to submit VAT returns and keep records digitally by 01 April 2019, it is advisable that you start preparing now by moving to a digital cloud-based platform. Preparing early will allow for a smooth transition and enable your business to deal with any issues and training prior to the deadline.
A recent survey carried out by a leading online accounting software company found that as many as 41 per cent of small business owners are still unaware of Making Tax Digital.