The first implementation testing phase of HMRC’s Making Tax Digital (MTD) went live on 16th October 2018. This means that the first 500,000 businesses are now able to join the government’s vision for the ‘end of the tax return’ and a ‘transformed tax system’ by 2020. By the end of this month it is hoped that another 100,000 businesses will also be able to be added to the testing phase.
Prior to this point, MTD has only been made available to a select group of businesses. However, the intention is that it will be rolled out for the majority of enterprises that reach a certain threshold by 31 March 2019. So, what’s involved in MTD and when is the best time to get on board?
Making Tax Digital
Reform of the tax system for businesses has been in the pipeline for some time. MTD is designed to make tax administration more effective, more efficient and simpler for the taxpayer – and to avoid the chaos and confusion that has frequently ensued under the current system. Overall, its purpose is to make it easier for taxpayers to get their tax right.
Under the new system, those businesses with a VAT taxable turnover of at least £85,000 will be able to use MTD to submit VAT returns via special software and will keep certain digital records. When MTD is made official next year it will become a legal requirement for any business that sits above the VAT threshold to comply with these requirements.
Joining the pilot
It’s possible to apply to get into the scheme before it becomes a legal requirement from April next year. Just under half of the 1.1 million entities in the UK that are VAT-registered and required to keep digital records and file MTD-compliant VAT return will be able to apply to join the scheme early. For those businesses in a position to do so it makes a lot of sense to get involved with the pilot scheme as soon as possible.
It will become compulsory from next year, so the opportunity to be prepared in advance, to alter systems and train staff to cope with the switch will help to avoid a situation where the deadline is approaching and non-compliance remains a possibility. Now that the first 500,000 businesses have been allowed onto the scheme, it’s a good time to apply to be part of the next round of entrants.
MTD-compliant software from Finansys SunSystems
Around 70 of the total 150 software providers who said they would be designing MTD-compliant software have already had their products recognised on the HMRC website (including FinanSys-SunSystems). So, for those who are ready to join the pilot and get prepared well in advance of the 2019 deadline, now is the ideal time to obtain MTD-compliant software and make the necessary internal changes to ensure your business will be ready.