What is MTD?

As a forward thinking web development company, we have been doing our invoicing, tax returns and all these things online for the best part of twenty years. It was obvious this would become mandatory eventually.

HMRC are currently working on implementing a number of initiatives to simplify the way businesses and individuals report their taxes. These updates, collectively referred to as “Making Tax Digital” (MTD), will be deployed in stages with the first due to be implemented in April 2019. The initial changes will mainly focus on how VAT information is filed with HMRC.

From April 2019 VAT registered businesses with a turnover exceeding the current VAT Threshold (£85,000) will need to keep their VAT records digitally and file their returns using MTD compatible software. We use QuickFile, which is free and exceptionally good. If you’re already keeping digital records then there’s nothing more you need to do.

If you are a VAT registered company with more complex requirements, HMRC decided to delay this until 1 October 2019 to ensure there is sufficient time to test the service with them in the pilot before they are mandated to join.

Below is a timeline of MTD according to HMRC:

October 2018
Open to sole traders and companies (excluding those which are part of a VAT group or VAT Division, trade with the EU, are based overseas or are newly registered for VAT and have not yet submitted a tax return) provided they are up to date with their VAT.

Spring 2019
Open to other sole traders and companies who are not up to date with their VAT and businesses newly registered for VAT that have not previously submitted a VAT return. Also open to partnerships and those customers that trade with the EU, and pilot open for MTD customers that have been deferred.

April 2019
Making Tax Digital mandated for all customers (except those that have been deferred).

October 2019
Making Tax Digital mandated for customers that have been deferred. The 6-month deferral applies to trusts, non-profit organisations that are not set up as a company, public sector entities required to provide additional information on their VAT return, local authorities, public corporations, traders based overseas, those required to make payments on account and annual accounting scheme users. The deferral will apply to around 3.5% of mandated customers.

April 2020
Impacts MTD for income tax and corporation tax. MTD for VAT may also be extended to all VAT registered businesses. Further details have yet to be announced.

Published on 18 October 2018 at 09:53:00