HMRC’s Making Tax Digital (MTD) is being rolled out from 1st April 2019 with MTD for VAT. This initiative is designed to ensure that the UK tax system is effective, efficient and easier for taxpayers.
Making Tax Digital will make it compulsory for all VAT-registered businesses with turnover above the VAT threshold of £85k to provide electronic submissions to HMRC, using compatible third party software rather than using HMRC’s online portal. The initiative is a key part of the government’s plans to digitise the tax system and make it easier for individuals and businesses to get their tax right and keep on top of their affairs.
For some businesses it may seem like a big change, but there are more benefits than you may realise, such as:
1. Streamlined processes
Making Tax Digital will streamline current tax processes and procedures in a number of ways, such as bringing together all of your tax information in to one easy-to-access system, including any liabilities and entitlements you may have.
2. Less paperwork
Rather than drowning under piles of paperwork, MTD compliant software will allow automatic records of money coming into and going out of your business, so all you’ll have to do is check the data and update it to HMRC each quarter.
3. Fewer tax mistakes
It can be complicated to get tax right and mistakes are costly. Even filing your tax return late will hit a business owner with a bill somewhere between £100 and 20% of the tax amount, depending how late it is. HMRC also says avoidable tax mistakes cost the Exchequer more than £8 billion a year, with £3.5 billion of revenue lost because of VAT-return mistakes alone.
MTD aims to dramatically reduce this amount – for businesses and the economy as a whole.
4. Growth from the cloud
Using cloud business software can lead to average revenue growth of a huge 20%. So MTD isn’t just a case of companies staying compliant with HMRC; it’s a way to elevate how that business works by automating its processes, saving more time and gaining better control of its most important information.
5. Anytime access
By going digital, businesses will be able to keep better track of tax-due and repayments owed, simply by logging in and looking at their current tax balance. Having instant access and visibility of your tax liability every few months will help to reduce the risk of being hit by any big surprise bills.
The good news is that there is an MTD module available for Infor SunSystems and Pegasus Opera 3 will be updated to be MTD compliant. Microsoft is also working towards ensuring that all supported versions of Dynamics NAV and Dynamics 365 Business Central will support MTD when it’s enforced in 2019.