Making Tax Digital – FAQs

What is MTD?

MTD stands for Making Tax Digital. It’s part of the government’s move to make all tax digital, transforming the current system into one of the most digitally advanced tax systems in the world.

When does MTD start?

MTD comes into force from April 2019. HMRC has, however, deferred MTD by six months for a number of businesses, including:

  • Trusts
  • Not for profit organisations that are not incorporated
  • VAT divisions
  • VAT groups
  • Public sector entities such as NHS Trusts and Government departments
  • Local authorities
  • Public corporations
  • Businesses based overseas
  • Annual accounting scheme users

These businesses will be required to meet MTD requirements by 1 October 2019

Who will be affected by MTD?

If your company meets the VAT threshold, in other words, has a turnover of £85,000 per year, you will be required to use MTD compliant software to keep a digital record of VAT transactions and submit your tax returns.

Under the regulations, you will need to:

  • Keep your VAT records digitally
  • Submit your VAT records to HMRC using MTD approved software

What if my turnover is below the VAT threshold?

If your turnover is below the VAT threshold, you can opt-in to MTD voluntarily and file your VAT information digitally.

Who is exempt from MTD?

A very limited number of companies will be able to apply for an exemption from MTD for VAT, including:

  • Businesses run entirely by practising members of a religious society whose beliefs are not compatible with the regulations, ie, those who are prevented from using computers.
  • Businesses for whom it is not reasonably practical to use digital tools to keep their business records or submit their returns. Reasons could include age, disability, location, etc.
  • Businesses who are subject to an insolvency procedure.

Do I need new software for MTD?

Any business affected by MTD will need to ensure they are using compatible Making Tax Digital software that meets HMRC’s requirements. The software must be on HMRC’s list of software packages.

Related posts