Making Tax Digital – have you received a letter from HMRC?
With everything that’s going on with Brexit, it’s safe to say most business owners have been a little preoccupied. However, like a slightly more subdued younger sibling to Brexit’s screaming tantrum, the government’s ‘Making Tax Digital’ (MTD) initiative has been feeling a little neglected. So, in a bid to grab our attention, HMRC will be sending out what it is calling ‘encouragement’ letters to businesses to try and increase engagement in the scheme. You may still have many questions about MTD and the encouragement letters but don’t worry, we’ve got the answers to all your questions from Steve Bolton of Synergee Accountants.
What is Making Tax Digital?
Steve Bolton: “MTD is a government initiative aimed to reform tax administration so that it is more advanced, easy and less fallible. Errors in records of tax data currently cost the Exchequer over £9 billion a year and this scheme aims to reduce this. Business owners will now be required to file their taxes online through MTD-compatible software or via a bridging software that will convert it to be compatible.”
Who will receive a letter?
Steve Bolton: “To explain this, we have to go back a bit. In 2017, it was announced that, for businesses with a turnover that is greater than the VAT threshold (currently £85,000), the MTD scheme would be implemented in the quarter starting from 1st April 2019. The VAT return information provided in April was due to be filed during June and that brings us to now. This means that if your turnover is greater than the VAT threshold, and you didn’t provide your VAT information digitally this quarter, you can expect to see a letter from HMRC. These are automatically generated, so you would receive one even if you did provide you tax information in some other form.”
What should you do if you receive a letter?
Steve Bolton: “Luckily, there are no penalties to the scheme, to ensure a soft opening but, there’s no guarantee how long that will last so it will be best to get up and running for the next quarter if you do need to file under MTD. If you do receive a letter, the best thing to do is to check – either with your accountant or by yourself – to see if your turnover for the 12 months leading up to or following the 31st March 2019 breached or will breach the £85k limit. If your turnover is over this limit, you will need to register to file your VAT under MTD.”
How do you sign up for MTD?
Steve Bolton: “To register for MTD you need to sign up for it via HMRC’s website, within the HMRC VAT portal. You will also need to have either compliant software or some bridging software which can directly upload to HMRC via information contained within spreadsheets – HMRC has more information on how to do this here.”
The move to digital tax return filing is designed to make life easier for the tax man, but with so many easy-to-use software packages available, you might like to see the benefits for your business, even if you haven’t yet crossed over the VAT threshold.
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