Making Tax Digital
Making Tax Digital (MTD) is a new initiative from HM Revenue and Customs (HMRC) that is transforming the existing UK tax system.
The primary aim of MTD is to make tax administration more efficient and easier for businesses to report their profits and losses closer to 'real time'. It will affect any VAT registered business with turnover above the VAT registration threshold of 85000. VAT registered businesses not required to comply with MTD will still be able to submit their VAT returns via the online portal for the foreseeable future.What does this mean for VAT registered businesses?For UK businesses this means the April-June 2019 VAT return will be the first return required to be filed in July/August 2019. If the VAT return period is Feb-April or Mar-May then the first VAT return periods subject to MTD will be May-Jul and Jun-Aug respectively. For offshore VAT registered businesses the implementation of MTD has been deferred by six months and the first return to be reported under MTD will be quarters beginning on or after 1 October 2019.
There are three important factors of MTD:
- Digital record keeping
- Digital links and
- Filing via HMRC Application Programming Interface (API)
- Permanent data
- Transaction data and
- VAT account information
Functional compatible software must be able to preserve the digital records and provide the information and VAT returns to HMRC using the API platform.When does it start?The first change we will see is in April 2019 when VAT returns will be submitted via API. For income tax this is forecast to be no earlier than 2020 and corporation tax the following year although it is expected that both these dates may be delayed. The UK Chancellor Philip Hammond confirmed in his Spring Statement on 13 March 2019 that the Government will be taking a 'light touch' approach to penalties during the transition period. Businesses that are working towards compliance with the new initiative will not be penalised during the first year of implementation.What are we doing?In our UK office we are already using software which is compatible with the API Platform. We have liaised with various advisors on the subject and it is clear the type of data records we hold and use to form the basis of our VAT returns are comprehensive and the means by which we submit these returns is in acceptable format. As such we wish to provide comfort to our clients introducing business to us that we have the toolkit to be able to meet the latest in HMRC's demands.
For further details about the services provided by our London-based Private Client & Corporate team please contact Donna Shorto or Sandra Francis in our Guernsey office on 01481 737600 email@example.com
This article was updated on 14 March 2019.