Making Tax Digital Overview

What is Making Tax Digital?

HMRC have created the Making Tax Digital initiative to make tax simpler for businesses. The aim is to make it effective, efficient and easier. The initiative has been put in place to increase automation, reduce human error and streamline the process. This allows businesses to submit VAT returns both easily and accurately.

Who does it affect?

Making Tax Digital for VAT is becoming mandatory in the next few months. By 1st April 2019, all business who are VAT-registered, with a turnover above the VAT threshold (£85k), must use the Making Tax Digital service to keep their records digitally and submit VAT returns.

There is a small exception to this, more information about which can be found on the gov.uk website. Businesses that fall into this category will be deferred for 6 months.

MTD will at first only apply to VAT returns. Additional taxes such as income and corporation tax will not become part of the mandatory MTD until at least April 2020.

How can I make sure I’m compliant?

The gov.uk website provides a list of software suppliers who are recognised by HMRC as supporting MTD. Xero are one of the software providers.

Xero is cloud based accounting software. The company has worked with HMRC to create software that’s compatible with the MTD movement, while remaining easy for small businesses to use. The benefit is that whether you’re currently using spreadsheets, Sage or Quickbooks, Xero allows you to easily transition your data.

Xero users can expect a streamlined system that works with their bank account to provide up to date, accurate information. The fact that it’s cloud based means that you are able to access the accounts wherever you are. You can also invite your accountant as a user to work with you. Furthermore, once you’re using Xero, you could utilise some of their additional services, such as payroll, expenses or projects.

At Roda, we can supply Xero so that you can be ready for Making Tax Digital on time.

For more details about Making Tax Digital, see the “VAT Notice 700/22: Making Tax Digital” on the gov.uk website.