Making Tax Digital (MTD) is an HMRC initiative designed to make sure the UK tax system is effective, efficient and easier for taxpayers.

Making Tax Digital for business (MTD) begins on 1 April 2019 with MTD for VAT. From that date, VAT-registered businesses above the threshold of £85,000 will be required to keep digital records and submit VAT returns using compatible software.

Other components of the Making Tax Digital programme, such as income tax and corporation tax, will be rolled out after April 2020 at the earliest.

How does Making Tax Digital affect me?:

All VAT registered businesses with UK taxable turnover over the VAT registration threshold (currently £85,000) will be required to comply with the MTD recording keeping and reporting requirements for the VAT periods which begin on and after 1 April 2019.

Where a business is VAT registered but has turnover under £85,000 at April 2019, it is not required to enter the MTD regime in April 2019. However, those businesses will have to monitor their turnover on a rolling 12-month basis, and if the turnover breaches the VAT registration threshold, the business will have to enter the MTD regime from the beginning of the next VAT period.

Once a business is within the MTD regime, it can’t opt out even if its turnover drops below £85,000. The only way out of the MTD for VAT regime will be to deregister for VAT.

Any business which registers for VAT on or after 1 April 2019 will be required to enter the MTD regime from the start of their first VAT period, unless the business has registered voluntarily, in which case MTD reporting will not be mandatory.

Charities with trading subsidiaries, and landlords who let VAT-opted property, will fall within the MTD regime on the same terms as other businesss

So what must I do?

All records must be kept digitally and VAT returns made using compatible software.A digital record mean any record captured and held in an electronic/digital format. This includes or image/copy of a paper record such as receipt or invoice, or any entry into an accounting system.

The record itself must include, as a minimum, the date, amount and category of each business transaction.

For more on Making Tax Digital, visit the HMRC website

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