Cardiff, UK - Making Tax Digital (MTD) – Frequently Asked Questions (FAQ’s)

Have you seen the TV adverts or heard the radio adverts and have questions regarding the UK Government initiative to “make tax digital”?

Or, have you had one of the “letters of encouragement” (the Governments words, not ours) to join MTD?

You may be asking yourself “do I need to sign-up for making tax digital” or “do I need to buy software for making tax digital”? There are many questions the MTD scheme has raised, especially for small business owners and even more especially for those just under, or just over, the VAT threshold.

Firstly, the HMRC are going to be “considerate” with companies that are doing their best to comply, even if they are not fully compliant.

HMRC recognises that businesses will require time to become familiar with the new requirements of MTD. During the first year, following the introduction of MTD, HMRC will take a “light-touch approach” and will not issue record keeping and filing penalties where businesses are doing their best to comply with the law.

If a business receives a penalty of any other type, for example for late payment or for inaccuracy, and believes the failure was due to problems arising from the transition to MTD, they have the right to appeal against the penalty and all relevant factors, including any transitional issues, will be taken into consideration.

Secondly, more practical advice and guidance are available. Ever since the new rules were first announced in 2015, the team at Hayvenhursts have been familiarising themselves with the rules and how to comply with them. We consider ourselves experts in terms of making tax digital. We are happy to provide guidance on yours, or your businesses, situation free of charge.

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What is Making Tax Digital?

Making Tax Digital, very often shortened to “MTD” is a plan by HMRC to streamline information to the “Tax Office”. HMRC’s ambition is to become one of the most digitally advanced tax administrations in the world. Making Tax Digital is making fundamental changes to the way the tax system works transforming tax administration so that it is more effective, more efficient and easier for taxpayers to get their tax correct.

At the moment, MTD is only being applied to VAT.

Why are the Government Moving to MTD?

Keeping records on paper and submitting VAT returns to HMRC manually results in errors – in a YouGov poll, 61% of businesses said they have previously lost receipts. Errors also occur in the manual transposition of data and manual calculations.

MTD offers a more integrated approach to business administration and tax, reducing the time businesses spend on administration in the longer term and making it easier for them to get their tax right.

It is thought the introduction of MTD will also streamline processes within HMRC, reducing overhead costs.

When Did Making Tax Digital Start?

Businesses that are required to submit a VAT return will have to do so for their first full VAT quarter after the 1st April 2019.

This means that if your normal return included May 2019 and your new quarter started in 1st June 2019 – by the 7th October 2019 you must be submitting your VAT return via the MTD process.

It is currently planned that “Income Tax” will come under the MTD mandate from April 2020.

Find out everything you need to know here: hayvenhursts.co.uk/accountancy-services/making-tax-digital-mtd-faqs/