A quick guide to Making Tax Digital

With Making Tax Digital coming into effect on 1 April 2019 for your first VAT return, it’s important to be aware of how it affects yourself and your business.

There has been a lot of confusion around MTD, including who it affects and how but we’re here to answer those questions.

Who is affected by MTD?

MTD applies to all VAT registered businesses with turnover over the VAT registration limit (currently £85,000).

If you are voluntarily registered and your turnover is below the limit, compliance with Making Tax Digital is optional.

Are there any exemptions?

There are some exemptions for religious and technological reasons but these tests will be applied very strictly by HMRC on a case by case basis.

What do I need to do?

The requirement is for all VAT records on sales and purchases to be maintained digitally, with digital links in place where more than one system is in use.

There are various options for achieving compliance:

• Use of cloud software, such as Xero. If you are using software make sure you are up to date as only latest versions are likely to be compliant.
• Use of spreadsheets with the aid of HMRC bridging software to create the necessary digital link for filing.
• Use of your own or bespoke software, again with digital links in place between the different systems.

You can also use a combination of the above. The key point is that the systems must be digitally linked.

There is also a soft landing period of one year to give businesses time to achieve compliance, so there’s time to ensure you understand how it works.

If you are not registered for Making Tax Digital with HMRC, you need to look into this with HMRC. You can do this at: https://www.gov.uk/guidance/making-tax-digital-for-vat

More information

Our Making Tax Digital factsheet contains more detail about the key points you need to know. 

We are here for you to provide as much help as you need in getting your business compliant with Making Tax Digital. Please contact us to discuss your current systems and to find out more about what you need to do.