Making Tax Digital
Posted on 2nd August 2023 at 15:54
Making Tax Digital (MTD) is an initiative introduced by HMRC in the UK aimed at modernising and streamlining the tax UK system. The main objective of Making Tax Digital is to make it easier for businesses and individuals to manage their tax affairs by moving to a fully digital tax system. The traditional paper-based and spreadsheet processes are being phased out, and tax-related information is required to be submitted electronically using compatible accounting software.
You may well have seen accounting software such as Xero, Quickbooks and Sage heavily promoted in the press and on TV.
These software systems provide the integration between your books and the relevant info being sent over to HMRC.
HMRC state that the main points of MTD to be;
Digital Record Keeping
Businesses are required to maintain their financial records using digital accounting software that is compatible with HMRC systems. This ensures that records are accurate, up-to-date, and easily accessible.
Digital Tax Submissions
Instead of submitting annual tax returns and VAT Returns, businesses need to submit their tax information quarterly through their digital accounting software to HMRC. This aims to improve accuracy, reduce errors, and provide more real-time information to both taxpayers and the tax authorities.
VAT Reporting
Making Tax Digital for VAT was the first phase of the initiative, which came into effect in April 2019. Under this phase, businesses above the VAT threshold were required to maintain digital records and submit VAT returns using MTD-compatible software.
Staged Implementation
The implementation of Making Tax Digital is being done in stages to give businesses and individuals time to adapt. Different taxes and types of entities are being brought into the system at different times.
Our take on this.
Overall what’s been coming out of HMRC for some parts of MTD has been a bit of a farce really.
The most controversial element of MTD was and still is how and when they are going to implement it for Income Tax Self Assessment (ITSA)
HMRC are attempting to have the likes of busy tradesmen/women, who with the greatest of respect are not the best at record keeping do away with their paper records and receipts and upload them on to a digital system ready for a quarterly submission.
In effect they will be doing four returns a year instead of one.
Good luck with that Mr HMRC.
Tagged as: Latest from HMRC
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