Bates Weston, helping you to make sense of Making Tax Digital and digital record keeping
Making Tax Digital (MTD) is the phased introduction of digital record keeping by HMRC, who are committed to making the UK tax system “one of the most digitally advanced tax administrations in the world”.
The original MTD proposals, published in 2015, anticipated the implementation of digital record keeping and quarterly updating by businesses, the self-employed and landlords for Income Tax Self-Assessment, Value Added Tax (VAT) and Corporation Tax between tax years 2018/19 and 2020/21.
Ambition on such a scale, although admirable, was not practical within the original HMRC timescale, so in a slower, phased roll out, only VAT registered businesses above the VAT turnover threshold of £85,000 will need tokeep digital records (for VAT purposes only) and provide VAT return information to HMRC through MTD compatible software from 1 April 2019. VAT registered businesses under the VAT threshold can use MTD, but this is voluntary.
However, HMRC’s longer term plan is that once they have proven that MTD for VAT is working well and digital record keeping has become widespread, they will look to introduce quarterly updates for income and corporation tax as well as VAT. These quarterly updates will be generated and sent direct from the digital record keeping software the business or their accountant uses. This will not be before April 2020 at the earliest.
MTD clearly has benefits for HMRC, most notably closing the tax gap, but online digital record keeping is also beneficial for your business too. It saves you time and you and your advisors can see your company’s financial position in real time, helping you to take key day to day decisions and plan ahead.
Stuart Hulland, partner at Bates Weston and the firm’s online accounting specialist comments:
“Bates Weston are fully behind MTD. We have been advising our clients to move to online digital record keeping in preparation for MTD since HMRC first announced its plans in 2015.
In preparation for submitting quarterly business returns including income tax, and corporation tax in the future as well as VAT from April 2019, we are recommending that our clients use cloud accounting software. We work in close partnership with market leaders Xero and recommend it for digital record keeping. As their advisors we can be given access to these records, advising in real time on issues as they arise. Clients appreciate the time saved by connecting to their businesses accounts from anywhere there is an internet connection and the automatic reconciling and transfer of bank transactions into their records.
We have considered alternative online accounting software providers and are happy to support any MTD compliant software a client chooses to use, but for smaller businesses we advocate Xero.”
In summary businesses should move to online digital record keeping now, not because they will probably have to do it from 2020 onwards, but because it makes sense to do it to improve the accuracy of their records and the efficiency of their business.
Stuart Hulland : stuarth@batesweston.co.uk : 01332 365855