Making Tax Digital (MTD) is a government initiative to transform the current tax system but places the onus for implementing the new system squarely on the shoulders of those being taxed.
MTD will initially be restricted to businesses with turnover above the VAT registration threshold of £85,000; HMRC has released legislation detailing what this will mean for those affected. Follow the link below:
Many of our GP practices, both dispensing and non-dispensing, are VAT registered therefore it is vital to understand what is going to change and how it is going to change the record keeping of practice finances.
From April 2019 VAT registered practices will have to:
- keep their records digitally (for VAT purposes only), and
- provide their VAT return information to HMRC through Making Tax Digital (MTD) functional compatible software
What really is Making Tax Digital?
MTD first came onto the scene in the 2015 budget; it was hailed as the end of the Self-Assessment tax return and a road map for a transformed tax system but has suffered repeated delays in introduction.
MTD becomes mandatory for VAT registered businesses with a turnover over the VAT registration threshold, and only in relation to their VAT obligations from April 2019.
April 2020 is the earliest potential date for mandated digital record keeping and quarterly updates of income tax and other taxes – pending further government announcements.
HMRC will not provide any software or tools to support with the implementation of MTD and it will be the practices responsibility to implement their own third party software such as IRIS or Sage.
This will enable the direct submission of the practices VAT return to HMRC i.e. directly from your software and not by typing the figures into your nine box VAT return on the Government Gateway, which is currently how the majority of our clients submit their returns.
Is it all as scary as it seems?
For most of you the simple answer is no as many of you are already on an accountancy package to record the practice finances. However if you are using excel spreadsheets (I know us accountants love to use them too) or a manual cashbook you will have to start using digital software from April 2019.
To find out more about Making Tax Digital please contact Rachel Ormston, Medical Services Accountant email@example.com