Making Tax Digital is a government initiative designed to make it easier for individuals to get tax right.
Under the scheme, from the 1st April 2019, any VAT registered businesses will need to submit their tax records to HMRC digitally using Making Tax Digital software, rather than using the HMRC’s Government Gateway.
But what will it mean for businesses?
VAT registered businesses
If your business is VAT registered, from April 2019, you’ll need to move to digital record keeping. If you don’t already use Making Tax Digital compliant software to keep track of VAT information such as invoices to customers and from suppliers, you will need to start planning for the new regulations.
Businesses that aren’t VAT registered
If your business is not VAT registered, then digital record keeping is optional. Although you won’t be required to keep digital records, switching to MTD offers a number of benefits, including allowing you to access updated income tax estimates whenever you want to.
Temporarily crossing the VAT threshold
If your business isn’t registered for VAT and you go over the threshold, you will need to ensure you comply with MTD requirements. If your turnover then drops and you are no longer over the VAT threshold, you will be required to continue to comply with MTD legislation if you are still VAT registered.
Of course, if you de-register from VAT at any point, you’ll no longer be required to meet Making Tax Digital rules.
Exceptions
There are a number of exceptions to MTD for VAT. If, for example, your business is run entirely by practising members of a religious society and their beliefs prevent them from using computers, you may be exempt. Or, if it is not reasonably practical for you to use digital tools to keep your records or submit your returns, you may also be exempt.
Any business subject to an insolvency procedure will be exempt.
