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Making Tax Digital – FAQ’s

We are now fast approaching the first stage of implementation for HM Revenue & Customs’ (HMRC’s) Making Tax Digital. Making Tax Digital (MTD) aims to provide a simpler and up-to-date system for taxpayers, by requiring most businesses, including sole traders and landlords, to maintain their accounting records on computer software. This should enable HMRC to automatically update their records, with relevant data on a business’s income and expenses, on a quarterly basis.

Who will be affected?

From 1 April 2019 most VAT-registered businesses, with a taxable turnover above the VAT threshold (currently £85,000), will be required to comply with MTD. Ultimately, Income tax and Corporation tax are also expected to be within MTD, however this is currently on hold until April 2020 at the earliest.

Which is the first return to be impacted?

MTD applies to the first full inclusive VAT period starting on or after 1 April 2019. For example, MTD won’t affect a return for the period 1 March 2019 to 31 May 2019. In this case the first return falling under the MTD regime would be the quarter 1 June 2019 to 31 August 2019.

What preparation is required?

Those impacted must keep records in a digital form, which is compatible with HMRC’s platform. Cloud based providers, such as Xero, Quickbooks or FreeAgent, should update automatically with no action required, however Sage packages may need upgraded to a compliant version. Manual records will no longer be an option, except for some exempt entities, and those using manual records will need to convert to digital record keeping.

Are spreadsheets compliant?

Spreadsheets can be used in conjunction with bridging software, however these must contain a digital data link, meaning that once data is entered is must be transferred digitally with no manual intervention. A digital data link could be formula driven cells or sending data to your agent for import, but not manually re-entering or ‘copy and paste’.

Although HMRC will adopt a ‘soft landing’ period for year 1, allowing some exemptions from digital data links, it is important to plan ahead to ensure business records will comply with MTD. This will also allow entities to benefit from the more regular communication that is likely to develop with their advisors, leading to more timely advice and planning opportunities.

If you would like to discuss your accounting software and/or processes to ensure you are MTD compliance then do not hesitate to contact us. We have a dedicated Amber Accounting team, who can offer expertise and support on your transition to Making Tax Digital.

To find out more about how our Amber Accounting team can help your business, please email [email protected] or call our offices on the numbers below.

Dundee – 01382 312140 / Forfar – 01307 474274.

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