Making Tax Digital was first announced in 2015 as part of the Budget, and it will soon become a reality for businesses. For those who are unaware, Making Tax Digital is a government scheme that will change the way that people and businesses pay their tax. The aim is to move to a system that is fully online.
Wait, I Have To Move Everything Online? When?
While this may all seem a bit daunting, the government has stated that businesses will be able to keep digital tax records at a pace that is right for them. We expect the system to be implemented in 2020 but this could easily change depending on how the testing phase unfolds. Once Making Tax Digital is introduced, it means that business owners are no longer going to be required to make tax payments via post, paper, and pen – a procedure that results in more than £9 billion being lost per year because of human error.
So, What Does This Mean For My Business?
At this very moment, nothing at all! Accountancy bodies and their members are in the trial phase. However, you do need to be prepared for some changes over the coming months, so sitting around twiddling your thumbs isn’t the best idea! From April 2019, you will be required to keep all VAT records online and you need to use compatible software to submit your VAT return to HMRC. If you currently keep your records in a non-MTD-compliant software, spreadsheet, or cashbook, you are going to need to make some changes to bring your approach up-to-date.
The Full Implementation: 2020
VAT payers get a head start, but when do other taxpayers need to fall in line with this new system? Well, that won’t happen until the system is a proven success. The aim is for April 2020, but it could easily be pushed back. Once the system has proven its effectiveness in regard to VAT handling and returns, it will be implemented across the entire spectrum of taxes. This gives your business a bit of breathing space, so make the most of it – don’t leave planning until the last minute.
Are There Any Exemptions?
You don’t have to meet the Making Tax Digital obligations if you cannot pay your tax online for any valid reason. For instance, if you live in a rural area with poor broadband or you have a disability, you may not be held to the new regulations.