What should I do about ‘Making Tax Digital’?

QAI run a business and have been reading about “Making Tax Digital” and am totally confused. Do I need to do anything? THE short answer is maybe. Making Tax Digital (MTD) is HMRC’s scheme to get more tax accounts online to increase efficiency and – they believe – increase the tax take.

The first thing scheduled to happen next year is for all VATregistered businesses to fill in and submit their VAT returns online. Currently many make manual adjustments to their VAT accounts and then use HMRC’s own portal to submit the return. This will no longer be possible and so businesses need to plan to get their records in the required state to submit from within their software.

Small businesses using any manual type records (including spreadsheets) are in an even worse position and should plan now their move to an appropriate software package, such as Xero or Sage.

I would urge all businesses to take advice and not leave these actions until the last minute as there are significant penalties for non-submission of VAT.

Looking ahead it is likely that quarterly returns of profit and loss may be required. Whilst this is undoubtedly a burden on business, it is also good practice to know exactly where you are financially at all times. A package such as cloud-based Xero will allow you to work collaboratively with your accountant to get the information you need to make good business decisions.

It is also the intended aim for all taxpayers to have a digital account for their personal affairs.

Again, HMRC believe this will increase tax take but a recent pilot actually showed more taxpayers paying too much tax rather than too little. It is to be seen whether this finding influences the decision makers.