Theresa Middleton
Director of Making Tax Digital (MTD), HMRC
It is important that businesses and individuals have the skills and confidence they need to seize the opportunities digital technology offers. In a world where customers and suppliers are already banking, paying bills, and shopping online, it makes sense for HMRC and businesses to bring tax fully into the 21st century.
Integrating business records and taxes into digital formats is an important step forward in giving businesses more control over their finances, allowing them to spend more time focusing on what they do best – business, innovation, expansion and the creation of jobs.
In less than two months, most businesses above the VAT (Value Added Tax) threshold will need to keep their records digitally and submit their VAT return direct from their software package as part of Making Tax Digital (MTD).
MTD begins in April 2019
The new process starts for VAT return periods commencing on or after 1 April, so, for the majority of businesses making quarterly returns, it will be August when they will need to make their first return under MTD.
Businesses will need software that is MTD-compliant
The service is open now to everyone who will need to use it from April, and we’ve been encouraging all businesses to join the thousands of others who have already signed up.
For most businesses, their accountant or other tax representative will already be aware and will be preparing to adopt the new service for their clients. For many already using software, it will then just be a case of enabling MTD-compatible software as part of an update from their provider.
Those businesses who are not represented by an accountant and/or don’t already use software will need to select software and sign-up to MTD. Our gov.uk web pages provide information on a wide variety of products, from free software for businesses with more straightforward tax affairs, to increasingly sophisticated paid solutions. There are also bridging products, which can be used with a spreadsheet.
£9bn tax gap due to errors
We know that the vast majority of people want to pay the right tax, but some struggle to do so, with errors accounting for a large proportion of the tax gap figure – over £9 billion in 2016-2017 – money that could be spent on improving public services.
Requiring businesses to keep their records digitally and send HMRC their VAT return data direct from their software will reduce the opportunity for these types of mistake. HMRC’s aim is that filing taxes will feel like a by-product of running their business’ finances, helping them to be more effective and efficient, allowing them and their agents to devote more time and attention to more important matters.
Anyone exempt from online returns is exempt from MTD
We are not forcing businesses to go digital for their VAT returns if they are genuinely unable to do so. Anyone who is already exempt from online filing of VAT due to factors such as age, disability, location or religion will remain so under MTD.
There is a process being piloted now for claims from those who are unable to meet the requirements of MTD. We recognise that businesses will require time to become familiar with these new requirements. Therefore, during the first year of mandation, HMRC will not pursue filing or record-keeping penalties where businesses are doing their best to comply with the law.
Those businesses that are registered for VAT but are below the VAT threshold are not required to use the MTD service, but can choose to do so.
What businesses should do now
We want to help business and their agents be ready for when MTD affects them after April. They can start preparing now by:
- Checking whether they are mandated from April or from October, and finding out what they need to do to if they are (including finding out which is their first return period under MTD).
- If they use an accountant or other agent to manage their tax affairs, they should talk to them about how they are preparing for Making Tax Digital.
- If they currently use software, they should speak to their provider about when their software will be MTD-compatible.
- Those who are agents will need to sign up for an agent services account.
- Becoming an early adopter and joining the Making Tax Digital VAT pilot. We’ve published a VAT Notice that explains the rules for Making Tax Digital for VAT and about the digital information that must be kept.
- Consulting our easy-to- use guide for businesses, agents and others including easy-to-follow advice, which is available here.
- Engaging with our webinars and videos for Making Tax Digital, which are available here.