What is Making Tax Digital – April 2019
MTD (Making Tax Digital) is a government initiative taken by HMRC, as a game-changer on VAT returns. The rearrangement means to make the technical alternatives available and encourage the users to make use of the online facilities for all the operations about taxation.
An insight into MTD
MTD for VAT is massive progress which will bring tax administration to the next level. Businesses, with the turnover, are exceeding the VAT threshold, have to keep digital records as of April 2019. The prime ambition is to bring a drastic change in the tax system countrywide by making it more efficient and user-friendly.
The system will experience a smooth shifting and it is expected to fully reconcile with the legislation starting from the 1st of April 2019. The businesses will be able to maintain and store the records by making use of the software available to use.
Essentials of the MTD
Businesses, including those who make the revenue from the property, will have to maintain the digital records of accounting.
It will be imperative for the businesses to make use of functional software that should have the ability to make use of HMRC’s MTD Application Programming Interface to interact with HMRC.
Impact of MTD
The regulation will have a direct impact on the excess of taxpayers that includes businesses, landlords, self-employed professionals, and so on. HMRC has done with the planning MTD for VAT to bring in the changes as seamless as possible to avoid any detrimental effect on businesses` everyday operations.
When is it happening?
October 2018: MTD for VAT pilot begins.
April 2019: Using a digitally compatible software for filing VAT and keeping business` financial records become mandatory.
April 2020: HMRC takes MTD for VAT on a larger scale in business.
Benefits of MTD for VAT
With the numerous perks of MTD for VAT, in the long run, businesses will be made digitally-equipped and be shifted to a paperless system. Whereas the few other benefits of the new regulation are as follows;
Access to the real-time data: You can now view the data about your tax along with other relevant information with regards to the tax you owe to HMRC through your software, more importantly, you no longer have to wait until the end of the tax year to find out how much you owe to the government.
Improved Accessibility: You can view your data from anywhere, anytime. So that you`ll be able to manage your taxable profit instantly.
Digital Records: The records of the tax and the returns, are saved online, which means you now can log in your HMRC account at a time suits you the best.
Recent updates
Ahead of MTD for VAT beginning 1 April, HMRC introduced three essential changes and lined up a couple more before the deadline as part of 700/22: Making Tax Digital for VAT.
MTD for VAT rules applies from 1 April 2019, so 31 March 2019 is the earliest date on which you can test your annual turnover. For example;
A Ltd. Company registered with turnover more than 85K from 1 March to 31 May. Then A Ltd. must comply with MTD for VAT from 1 June 2019.
B Ltd. Company registered on 1 September 2019, then B Ltd. must reconcile with MTD for VAT from 1 September, as its taxable turnover is likely to exceed 85K until 31 July 2019,
C Ltd. Registered VAT despite its turnover is under 85K and will likely exceed 85K as of November, then C Ltd. will comply with MTD for VAT from 1 December 2019.
In conclusion, there are different deadlines to register MTD for VAT depending on the businesses' VAT registration date.
Soft Landing: Refers to the incoming period between 1 April 2019 to 31 March 2020. Soft Landing only applies the waiving the conditions for digital links between software products within the accounting system.
ASA sign-up: In addition to UTR number, you must now enter your company`s money laundering supervision expiry date.
Conclusion:
Making Tax Digital is an initiative tailored to ensure the tax system effective, efficient, and easier for businesses as well as the government and other related entities countrywide in the long run.
The initiative is considered to be a restoration of huge tax deficits and is likely to enhance the digital alternatives in the economy in the long run.
Our Online Business Tax Management experts are here to help you to set up a digital tax account today. With HMRC making tax digital, keep up with digital April.
