Making Tax Digital: the myths

Making Tax Digital: the myths

From 1 April 2019, Making Tax Digital (MTD) for VAT requires most businesses with a turnover above £85k to submit their VAT returns using MTD compliant software as well as keep and maintain digital records.

There are many businesses that are still unaware of — or confused about — these upcoming changes.

Common myths about going digital.

1. If I’m using the current HMRC Gateway — I don’t need to do anything

When businesses are asked about MTD, the response is usually something like this, “I’m currently using the HM Revenue & Customs (HMRC) Gateway, so why should I change my processes?”

Simply put, it’s because the new MTD system is not the same as the current HMRC Gateway.

The HMRC Gateway will close of to businesses above the VAT threshold for VAT periods starting on or after 1 April 2019 and they will need to file using MTD compliant software.

2. I don’t need to worry about MTD until 2020

This really depends on the size of the business. If your turnover is below the £85k threshold but you’ve voluntarily registered for VAT, you’ll need to monitor the monthly turnover.

If the turnover tips over, your business will need to comply with MTD — even if it drops again.


3. Paper records are sufficient — as long as I transfer the totals digitally

Research has revealed one-third of small businesses still write down expenses and keep receipts in a bag. But under MTD all business records need to be kept digitally.

Businesses can continue using spreadsheets to calculate VAT and keep digital records but will still need to use HMRC-approved bridging software to submit VAT returns.


4. My accountant will do it all for me

It’s true, your accountant can use their own MTD-compliant software to file VAT returns on your behalf. However, you need to make sure that your entire record keeping process is digitised, preserved, and without any manual intervention.

So if you do your own bookkeeping, you’ll need to start using MTD-compatible software to ensure compliance.


5. My businesses will have to report more frequently to HMRC

This isn’t the case. VAT registered businesses with a turnover above the VAT threshold already have to report and pay any VAT due quarterly, so there’s no increase in the frequency, it’s simply a different way of filing the information.

Retention periods for documentation also remain the same as before — in general for six years after the end of the last financial year (there are some exceptions). Under MTD businesses will need to keep digital records for the same period.

We’re ready for Making Tax Digital

The programme goes live on 1 April 2019 so, if your turnover’s more than the £85k VAT threshold, you’ll need to file your returns directly and digitally. The good news is that we’re ready! If you are looking for assistance please talk to us about your business.