Do you need to register for Making Tax Digital?
Making Tax Digital (MTD) looms on the horizon for many companies – it’s the biggest change to the way tax is calculated and collected for 20 years. However, some companies will be exempt from this latest initiative. Senior Accountant, Chris Street at Chadwick and Company explains more about MTD’s introduction and outlines who will be exempt and what that will mean to them.
April 2019 start date
The MTD scheme has been running on a trial basis since October 2018, with around half a million businesses offered the chance to take part in the pilot. In April 2019, MTD will commence for many sole traders and companies which are registered to pay VAT. These individuals and companies will be required to compile their tax information, invoices, payments, purchases and other financial information as digital data and must submit their VAT records digitally via MTD-compatible software, such as Xero or Sage. Paper records will no longer be required and some companies’ accounting software may need upgrading.
Who is exempt from MTD?
But what about companies and individuals that are exempt? Companies that are not VAT registered and fall below the proposed £85,000 turnover limit during the year commencing April 2019 are still required to keep their records digitally and to begin sending HMRC their VAT returns using MTD approved software. There are some industries with a turnover of more than £85,000 that do not have to register, for example, insurance and medical companies. In addition, businesses and organisations with particularly complex structures, size, tax arrangements or special circumstances will be exempt from the 2019 rollout.
Defer until October 2019
This will include clients such as those who are deemed exempt due to their age, disability or location (such as a rural customer who could have limited access to broadband). Other exemptions include trusts, ‘not for profit’ organisations that are not set up as a company, and VAT divisions and groups. Also not yet required to subscribe to the scheme are public sector entities that have to provide additional information on their VAT return (Government departments, NHS Trusts), plus local authorities, public corporations, traders based overseas, traders required to make payments on account and annual accounting scheme users. All these companies can defer digital taxation until the beginning of October 2019.
Whether it’s today or in the future when you’re required to go digital, it’s worth talking to the experts about how you can make MTD work best for your business.
Chadwick & Co is a Xero Silver Champion Partner. Senior Accountant Chris Street is one of our twelve qualified Xero trainers. So, whatever the size of your business, if you seek advice on any aspect of the introduction of MTD why not email us or call Chris on 0161 370 9600.