The passing of the 2018-2019 budget by the UK parliament makes it certain that Making Tax Digital (MTD) for VAT will be effected in April 2019. MTD was designed to digitize the United Kingdom’s tax system and make it even better. But the question we need to ask ourselves is why the budget was proposed and why parliament passed the bill?
It is estimated that Her Majesty’s Treasury loses about £9bn per year due to mistakes that can be avoided. The new MTD is, therefore, intended to improve accuracy and reduce the money lost through such mistakes.
Things to Note about MTD
Notice that MTD will affect businesses whose turnover is above the VAT threshold of over £85,000. Here are important guideline that are stipulated in bill, which should make you consider making your business MTD compliant.
- By 2019, all businesses with a turnover above the VAT threshold £85,000 will be required to store all the VAT records digitally and will be mandated to send their returns to MTD compatible software. However, if in a certain year the turnover is less than the threshold after exceeding it in the previous year, they will still have to follow the regulations unless the business meets exceptional criteria or is de-registered from the VAT.
- Any business that starts using MTD VAT returns will not be allowed to revert to the older method where returns were filed through the HMRC online portal.
- The deadline for filing returns and making payments will not change.
- The software for preparing and filing VAT returns must be compatible with MTD by April 2019
- All businesses must own software that will allow them to share data digitally by April 2020.
- That MTD VAT returns will only be generated by information stored digitally. This information will be used to fill the 9 VAT return boxes.
- All businesses whose annual taxable turnover has never gone above £85, 000 thresholds will be exempted from MTD changes.
With this information in mind, businesses have been advised to utilize the remaining five months to ensure that they are MTD compliant before the system is rolled out in April.
So to save tax contact the leading Manchester Accountants on Tel; 0161-278-2714 today and request your free tax and business review.