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Getting your business ready for “Making Tax Digital”

When HMRC announced the new scheme to bring the tax system into the 21st century in 2015, their plans were ambitious. HMRC wanted to implement the new system between 2018 and 2020. Industry experts raised concerns, however, and HMRC have now proposed a revised timetable for “Making Tax Digital”.

HMRC Expectations regarding Making Tax Digital

HMRC are expecting every business to keep their own records digitally. This needs to be done via third party commercial software that can be kept on a PC, laptop, tablet or your phone. The idea is that this should make record keeping easier. If you are using different software systems for different parts of your business, they all need to be digitally linked.

What does this mean for you as a business now

HMRC will implement Making Tax Digital (MTD) in phases. If you are a VAT registered business (turnover above £85000 annually), the implementation deadline for MTD is April 2019. This applies only to your VAT return – you will have to keep digital records using “functional compatible software” for VAT purposes. Should your turnover fall below £85000 per year, MTD requirements will stay in place.

There are a few exemptions to the turnover rule based on grounds of religion, age, disability, remoteness of location, and others as well as insolvency. Businesses that fall under these exemptions can, however, opt in.

At this point in time, HMRC will introduce requirements for digital record keeping for smaller businesses and for other taxes as well as National Insurance Contributions in April 2020 at the earliest. This gives HMRC enough time to make sure they test the new system. They also assume that by then more businesses will use digital record keeping.

Digital record keeping

These are the records you must keep digitally from April 2019, if you are VAT registered and not exempt from MTD.

  • So-called “designatory data” such as your business name and address, VAT registration number and which VAT accounting schemes you use;
  • Time, value and rate of VAT for each supply made and received;
  • The VAT account – this is the link (or audit trail) between primary accounting records and the VAT return);

What about the VAT return?

The software will calculate the VAT return for you. As a business owner you will only have to confirm everything is correct, the software then submits for you.

An agent (your accountant) can, however, still submit for you. To do this your agent must have access to the functional compatible software that holds your mandatory records.

We will keep you updated about any developments on this topic.

How can Alba help?

We can help you prepare for the changes before April 2019 so that your business is ready to start the new system on time. If you have any questions please do not hesitate to contact us either via email admin@alba.uk.com or by phone 01509 853779.

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