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Making Tax Digital

Monday 01 April 2019

HMRC is offering a range of support ahead of the changes due from 1 April 2019 affecting VAT-registered businesses with a taxable turnover above £85,000.

Making Tax Digital is a key part of the government’s plans to make it easier for individuals and businesses to get their tax right and keep on top of their affairs.

Making Tax Digital is making fundamental changes to the way the tax system works – transforming tax administration so that it is:

  • more effective
  • more efficient
  • easier for taxpayers to get their tax right

Making Tax Digital for VAT

VAT-registered businesses with a taxable turnover above the VAT threshold are required to use the Making Tax Digital service to keep records digitally and use software to submit their VAT returns from 1 April 2019.

The exception to this is a small minority of VAT-registered businesses with more complex requirements. HMRC have made the decision to delay mandation for these customers until 1 October 2019 to ensure there is sufficient time to test the service with them in the pilot before they are mandated to join.

Income Tax

Some businesses and agents are already keeping digital records and providing updates to HMRC as part of a live pilot to test and develop the Making Tax Digital service for Income Tax. Self-employed businesses or landlords can voluntarily use software to keep business records digitally and send Income Tax updates to HMRC instead of filing a Self Assessment tax return.

Help for businesses, self-employed people and landlords

The improved accuracy that digital records provide, along with the help built into many software products and the fact that information is sent directly to HMRC from the digital records, avoiding transposition errors, will reduce the amount of tax lost to avoid errors.

The government announced in July 2017 that the pace of mandation would be slowed and that Making Tax Digital will not be mandated for taxes other than VAT until at least April 2020. The Government further announced in March 2019 that they would focus on supporting businesses to transition, and will therefore not be mandating Making Tax Digital for any new taxes or businesses in 2020.

In October 2018 HMRC opened a VAT pilot to half a million businesses and have published a VAT Notice which explains the rules for Making Tax Digital for VAT and about the digital information that must be kept.

HMRC have also published a communication pack which supports their partnership working arrangements with stakeholders, who can use the contents to inform their own communications activity and key messages for their clients, customers or members.

More information

HMRC provides a wide range of digital services and support for businesses and the self-employed which can be found here and have produced a short video to help you with 'Digital record keeping for VAT' on their YouTube channel.