HMRC has started phasing in its landmark Making Tax Digital (MTD) regime, which will ultimately require taxpayers to move to a fully digital tax system. Under the new rules, businesses with a taxable turnover above the VAT threshold (currently £85,000) must keep digital records for VAT purposes and provide their VAT return information to HMRC using MTD functional compatible software.
The new rules came into effect from 1 April and apply to the first VAT period starting on or after 1 April 2019.
For some VAT-registered businesses with more complex requirements the rules will not have effect until 1 October 2019. Included in the deferred start date category are VAT divisions, VAT groups and businesses using the annual accounting scheme.
The government has confirmed that a light touch approach to penalties will be taken in the first year of implementation. Advising that where businesses are doing their best to comply, no filing or record keeping penalties will be issued as the focus will be on supporting businesses to transition to MTD. The government has confirmed that it will not be mandating MTD for any new taxes in 2020.
Figures published by HMRC show that almost 1.2 million businesses are affected by MTD for VAT.
Financial Secretary to the Treasury, Mel Stride MP, said:
‘In a world where businesses are already banking, paying bills and shopping online, it is important that the tax system moves into the 21st century.’
We Can Help
We understand that these new HMRC regulations entail massive changes for many clients who are still using manual records. We will endeavour to help all of our clients convert their records into a format acceptable to HMRC, If you need further information or advice please contact us.
As accountants we have arrangements with several of the major software companies to obtain MTD compliant accounting software at discounted rates on behalf of our clients, get in touch if you would like to find out more.
More details regarding MTD can be found within HMRC VAT Notice 700/22
Internet link: GOV.UK