HMRC have an ambition to become one of the most digitally advanced tax administrations in the world. A major inroad in this ambitious project is the introduction of Making Tax Digital for VAT.
What is Making Tax Digital for VAT?
Making Tax Digital is a government initiative aimed at streamlining the tax administration process making it more efficient and user-friendly for taxpayers. Improved accuracy and greater cohesion in filing figures are among the other goals the programme sets out to achieve.
Given the scale of the project, HMRC recognised the need to slow down the implementation of the programme and therefore phase one, Making Tax Digital for VAT, was launched on 1 April 2019. Making Tax Digital will not be mandated for taxes other than VAT until at least April 2020.
The 7thAugust marked an important milestone on the Making Tax Digital (MTD) journey; it was the filing deadline for the first tranche of businesses with quarterly VAT periods (April to June) since MTD was enforced.
VAT registered businesses with a taxable turnover above the VAT threshold of £85,000 are the first to have had to comply with the new initiative with others to be notified at a later date.
Those applicable are now required to use the MTD service to keep records digitally and use approved software to submit their VAT returns.
How do I comply with Making Tax Digital?
HMRC hopes the introduction of MTD will help taxpayers get their tax right first time, avoidable mistakes cost the Exchequer over £9 billion a year.
Since the launch of MTD on 1 April 2019, businesses who meet the prescribed criteria have been required to make the appropriate changes to their existing processes to ensure that going forward they have:
- A digital record of all VAT transactions; and
- Are using an approved third-party software package to submit their VAT returns to the HMRC via the Making Tax Digital service.
What progress has been made with Making Tax Digital for VAT?
The recent August deadline did not apply to all 1.2 million mandated businesses, and October is the next important milestone businesses need to be aware of.
Theresa Middleton, Director of the Making Tax Digital programme says ‘Following on from the first Making Tax Digital deadline for monthly filers in June, it will give a good indication of the progress we’ve made and the size of the task remaining’.
Customers who missed their first mandated date will be contacted directly to be reminded to sign up. Whilst customers assigned with a start date of 1 October 2019 are now able to sign up the service. The advice is to sign up to the programme prior to this date, particularly those setting up direct debits.
Director of Making Tax Digital at HMRC, Theresa Middleton, has reassured taxpayers that ‘during this first year we won’t be issuing filing or record keeping penalties to businesses their best to comply’.
Over the coming months it is important to keep informed about any updates and announcements regarding the MTD programme that apply to your business.
Making Tax Digital for VAT with Phebys Accountants
For advice and support on Making Tax Digital for VAT, contact Phebys Accountants on 01480 896267, or email firstname.lastname@example.org.