The Making Tax Digital (MTD) process will affect all businesses by 2020 (except those exempt), and it’s important to prepare for the switch. Due to inaccurate tax records being kept and incorrect amounts of tax being paid to the HMRC, a new system is being introduced, whereby accounting and tax collection will be digital. The system aims to prevent the £9bn per year losses being made as a result of avoidable tax calculation mistakes that have occured during non-digital tax collection.
Making Tax Digital for businesses will begin in April 2019, with VAT-registered businesses with turnover above the threshold of £85k being the first to submit VAT returns and tax records via a digital software such as Xero and Quickbooks. This will make tax administration easier, with businesses being able to pay the correct amount on time. With the new system, you will be able to keep records of your accounts and expenditure via your device, enabling you to send quarterly financial updates to HMRC through their software or accounting app.
**Companies who fall into at least one of the following categories will be deferred for 6 months:
- ‘Not for profit’ organisations that are not set up as a company
- VAT divisions or groups
- Those public sector entities required to provide additional information on their VAT return (Government departments, NHS Trusts)
- Local authorities
- Public corporations
- Traders based overseas
- Those required to make payments on account and annual accounting scheme users
Changing how you manage your accounts can be stressful, and we are here to make the switch easier.