MTD

The future of reporting to HMRC

There is some doubt as to the timing of its introduction but HMRC’s Making Tax Digital (MTD) initiative will mean that businesses and individual taxpayers will be able to file and access their own tax affairs online via digital tax accounts.

The first phase of this programme, Making Tax Digital for VAT, started on the 1st April 2019and requires digital VAT record keeping and returns to be submitted electronically for the majority of businesses that are VAT registered.

Businesses are now required to use the Making Tax Digital service to keep records digitally and use MTD comparable software to submit their VAT returns.

This shift in VAT reporting brought about by MTD, introduces some significant new rules for how most businesses will submit their returns.

MTD for VAT focuses on three key requirements;

That records must be kept digitally – storing all transactions in electronic form

That there are digital links to all transactions – i.e. there is a digital link between final numbers and source data.

All VAT submissions must be made digitally – there are a few exceptions for specific companies with complicated returns.

There are various accountancy software systems available which enable businesses to adhere to this requirement. James Scott Accountants recommend Xero software as their preferred option.