Making Tax Digital is a government project that will require tax payers to keep electronic records of all transactions.
Initially Making Tax Digital was going to hit individuals first, with sole traders and landlords being slated for 2018. This has not happened and has now been pushed back to April 2020 at the earliest. Who knows whether they will manage to roll it out in 2020. My opinion is that they wont, there's just too much to do and only another year and a half to get it done.
The next milestone is MTD For VAT. That was promised for 2019 and it looks like it is going ahead as planned.
From April 2019, VAT Returns will need to be submitted via the new MTD portal. That's not such a big change, since HMRC tells us that 98% of VAT Returns are submitted online already.
The bigger change is that from April 2019 all VAT registered businesses will be required to keep electronic bookkeeping records and also to submit their return directly from computer software without re-keying information into the HMRC website, it all has to be digitally transferred. Effectively this will out-law the use of cashbooks and most spreadsheets that people are using at the moment.
There have been some calls to delay MTD for VAT, and plenty of sceptics who don't expect HMRC to be ready on time. But those calling for delay are facing plenty of criticisism for trying to drag the economy backwards, and every sign from HMRC is that they're ready to go.
MTD for VAT was passed in to law in July 2018 and software firms like Xero are celebrating their successful trials of the new submission API (an API is the technology that software companies will use to send VAT Returns to HMRC).
So, do you still keep paper records? Or do you have a few spreadsheets that you use for the quarterly VAT Returns? If you do, then it's vital you start thinking about MTD now. You are going to face some big changes in April 2019 and I do not think MTD for VAT will be delayed.
Are you ready for MTD? I am offering a free MTD for VAT consultation for anyone who's concerned. Give me a call on 01823 617580 if you want to find out more.
The government has committed that it will not widen the scope of Making Tax Digital for Business beyond VAT before the system has been shown to work well, and not before April 2020 at the earliest. This will ensure that there is time to test the system fully and for digital record keeping to become more widespread.