MAKING TAX DIGITAL – HOW WILL THIS AFFECT YOU?

On the back of GDPR comes possible one of the biggest changes in tax reporting in the last 20 years.

So are you ready for Making Tax Digital?

What is Making Tax Digital

Her Majesty’s Revenue and Customs office have the ambition to become the most advanced tax administrations in the world. They see Making Tax Digital as fundamental to this.

Mel Stride MP, Financial Secretary to the Treasury, said:

“HMRC is transforming the tax administration so that it’s more effective, more efficient and easier for taxpayers. Today’s announcement means that around half a million businesses will be able to join Making Tax Digital and start filing their VAT returns online, making it easier to get their tax right the first time.”

More and more businesses use digital tools every day to help them operate – tax shouldn’t be different. This is a major step towards bringing VAT into the 21st century.

Theresa Middleton, Director for Making Tax Digital for Business, said:

Millions of people are already banking, paying bills and interacting with their suppliers and customers online. Using digital tools to help businesses manage their business income and expenses and get their tax right builds on this momentum and will also help them get more control over their finances.

MTD 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

Or at least that’s what the objective is.

What does Making Tax Digital for VAT Mean to you?

Currently, you probably submit your VAT returns via paper or stand-alone electronic formats. From 1st of April, 2019 businesses with a taxable turnover above the VAT threshold will be required to use the Making Tax Digital service to link to the HMRC system. This means records will be kept digitally and you will need to use software to integrate to this system to submit your VAT returns.

There is an exception in that a small minority of VAT-registered businesses with more complex requirements will be exempt until  1 October 2019. This is to allow them sufficient time to test the service with there complex requirements before they have to join.

For the rest of us, it’s a pretty tight timeline.

Making Tax Digital for VAT timeline

October 2018
Open to sole traders and companies (except those which are part of a VAT group or VAT Division) provided they are up to date with their VAT. Those who trade with the EU, are based overseas, submit annually, make payments on account, use the VAT Flat Rate Scheme, and those newly registered for VAT that has not previously submitted a VAT return, are unable to join at this point. Those customers with a default surcharge within the last 24 months will be able to join the pilot by the end of October 2018.

Late 2018
Private testing begins with partnerships and those customers that trade with the EU.

Late 2018/Early 2019
Open to other sole traders and companies who are not up to date with their VAT, users of the Flat Rate Scheme and businesses newly registered for VAT that has not previously submitted a VAT return.

Early 2019
Open to partnerships and those customers that trade with the EU.

Spring 2019
A pilot open for Making Tax Digital customers that have been deferred.

April  2019
Making Tax Digital mandated for all customers (except those that have been deferred).

October 2019
Making Tax Digital mandated for customers that have been deferred. The 6-month deferral applies to customers who fall into one of the following categories: trusts, ‘not for profit’ organisations that are not set up as a company, VAT divisions, VAT 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. The deferral will apply to around 3.5% of mandated customers.

One good piece of news is that the government announced in July 2017 that the MTD rollout would be slowed down. At one point all taxes were going to be mandated for integrated electronic reporting. Now it will only be VAT, well until at least April 2020.

For more details the government have published a communication pack which provides information on the scope, requirements of MTD please give it a read. MTD is not like GDPR or EU marking. It will happen on time, it is compulsory and you will need to comply from April 2019.

So if you are a Metalogic Customer what will it mean for you?

The iMetal team have been working hard in association with our Sage partners to ensure that you can comply with the legislation in all aspects. It will mean a software upgrade for you and you need to contact your account manager to book your slot as all our UK clients will need this upgrade and it is time sensitive.

Our Sage partners Accord will be sending out an email direct regarding Sage 300 solutions and requesting you fill in a questionnaire which will allow Accord and Metalogic to implement the correct solution at the right time scale to meet your requirements.

For our classic clients on Stockmaster it’s a similar story so again please don’t leave it late to get in touch.  We will be contacting you to inform you about the upgrade and the details of what it involves but get ahead of the queue now!

For further information please contact your account manager or Andy Jackson Operations Manager.