Making Tax Digital

Updates, insights and answers

Making Tax Digital (MTD) is the UK Government’s plan to make it easier for individuals and businesses to stay on top of their tax affairs. HMRC would like the UK to become one of the most “digitally advanced tax administrations in the world”.

This means making big changes to the tax system and administration of the system. The aims are to make the tax system more effective, efficient and easier to get the amount of tax you pay correct.

While the MTD initiative has not progressed as quickly as HMRC originally planned, it is moving forward and will continue to do so regardless of the UK’s relationship with the European Union. The first area that MTD focuses on is VAT.

Since the start of April 2019 the vast majority of businesses that are VAT registered and have an annual turnover above the current VAT threshold of £85,000 are now required by law to use MTD to complete their VAT returns.

This process now involves setting up a digital tax account and filing their quarterly returns online. These businesses will need to use an accounting system that can integrate with the new HMRC digital gateway. HMRC will also require access to transaction details and calculations provided by the software used.

At ISA Consortium we can help you make sense of all the changes and set up your systems correctly to ensure a smooth and efficient change over. We can also manage and complete your VAT returns as part of our services to help keep your business running smoothly.

MTD Timeline

There are a number of dates and deadlines to be aware of and we’ve highlighted a few here for you:

APRIL 2019

All businesses with a turnover exceeding the VAT threshold are required to submit digital records for the VAT periods starting from 1st April

7th June 2019

You'll need to file your first digital VAT return if you submit monthly returns

7th August 2019

You'll need to file your first digital VAT return if you do so quarterly for the period April to June 2019

APRIL 2020

This is the end date for the "soft landing period" - from this date onwards there must be a digital link where software is used to submit returns to HMRC

7th Sepember 2020

You'll need to file your first quarterly return if you do so for the period May to July 2019

7th October 2019

You'll need to file your quarterly return (if you do so) for the period June to August 2019

Frequently Asked Questions

MTD is the government’s initiative to get all taxpayers (individuals and businesses) a digital tax account, giving them the ability to submit tax returns online. The aim is to modernise and improve the UK tax system.

Once you’ve got used to the new way of doing things, going digital will mean:

  • Greater efficiency
  • Fewer errors in your data, as you and HMRC share the same data
  • HMRC will be able to approve refunds that currently cause extra checks more quickly
  • More free time

With the aid of cloud based software, you will have convenient access to your data from anywhere. This software will also make it easier for your business to record and file your tax returns online.

MTD for businesses began on 1 April 2019 with VAT: you probably noticed the timeline further up this page.

Other areas of MTD, such as income tax and corporation tax, have been put on hold until April 2021 or later. We’ll be keeping this page updated with details as HMRC releases them.

If you have a VAT registered business with an annual turnover above the threshold of £85,000, you need to keep digital records and submit VAT returns using compatible software.

This involves setting up a digital tax account and filing your returns online using an accounting system or app that’s integrated with the new digital gateway that HMRC is building.

HMRC will also want online access to transaction details and VAT calculations. Paper records will no longer be sufficient.

You need to ensure that the software you currently use is MTD compatible. If you’re used to submitting VAT returns on spreadsheets, you will need ‘bridging software’ to bridge the gap between Excel and HMRC’s system.

If you already use appropriate software then this is a good start, but you may still need to upgrade your software so that it can connect to the new HMRC gateway. As MTD progresses you may also have to change the way you connect transactions that are recorded in a different software (e.g. supplementary calculations in Excel or sales systems).

Our MTD team would be happy to advise you on this: please use our enquiry form to get in touch.

If this is the case then you will need the following:

1. MTD compatible software
2. Your government gateway login details
3. Email address connected to your government gateway
4. Business type (e.g. Limited company)
5. Company Registration Number (as per Companies House)
6. UTR (10-digits)

Then visit the government’s website and complete the questions with the above information.

You will be asked to agree to receiving information by email and to confirm the email address. HMRC will then send you an email for verification and you must click on the link provided in that email.

This will then take you to the final sign up page asking you to confirm you want to join the pilot. Once you select to join the pilot it will take 72 hours for HMRC to confirm that you can take part in the trial. Once you receive that notification by email, you need to follow the instructions within your software.

We expect that the pilot will automatically switch to live.

There is likely to be a grace period for businesses to put in places their new systems, but after that there will be penalties for business that don’t comply with the MTD regulations.

If your VAT-registered businesses falls below the £85,000 annual turnover threshold, you will not need to be compliant until 2020 or later. Even so, we’d advise you to make sure you are prepared as soon as possible. Our MTD team is available to help: please get in touch via our enquiry form.

As an individual taxpayer, you will need to use a personal tax account through HMRC. This will bring together all your details in one place: more convenient for you and more efficient for HMRC.

For individuals who are self-employed and individuals who have a rental property, quarterly accounting will not come into effect until at least 1 April 2021.

Details are yet to be confirmed but you will have to report your income and expenses quarterly to HMRC.

Keep an eye on this page for the the latest news.

Frequently asked or not, we’d be happy to help answer it. You can contact us by clicking here.

Working with Technology

Under the new system, you will have to ensure your software is compatible with MTD. If you’re used to submitting VAT returns on spreadsheets, you will need ‘bridging software’ to bridge the gap between Excel and HMRC’s system. If you are using a bespoke software or ERP system, it is worth checking with your software provider what their plans are and if they will be able to upgrade the software in time.

The most reliable alternative is cloud based (online) accounting and bookkeeping software. Leading providers including QuickBooks have confirmed they will be compatible with MTD by April 2019: you will be able to submit directly from their software and meet HMRC requirements.

ISA Consortium are Making Tax Digital and Quickbooks Platinum ProAdvisors

If you’re not using online software yet, the prospect shouldn’t worry you. It’s an opportunity to become more efficient and more profitable. Both are things we are pleased to support our clients with: we work closely with our recommended provider QuickBooks, as one of their platinum partner firms.