In 2019, HMRC is introducing the newest regulations involving the digitisation of tax in Making Tax Digital for business. The new requirements will apply to any business with an annual turnover above the VAT threshold, as well as those that have voluntarily registered for VAT.
What MTDfb means
Making Tax Digital for business (MTDfb) refers to HMRC’s upcoming plans to introduce a requirement that all businesses report their VAT directly online through an approved accounting software.
This means the end of paper records and the end of Word and Excel when it comes to managing VAT for your business.
The aims are to simplify the tax filing process and to make it easier for small businesses to manage and report VAT to HMRC. It also aims to help reduce the potential for errors.
According to HMRC, taxpayer error recently accounted for £8 billion each year in lost tax. The new measures plan to reduce this and also to help self-employed, landlords, and small businesses to maintain a clearer overview of their business at any time.
While it may seem like a pain to move your business over to a software or online system, most software available today makes managing your income and expenses faster and simpler - meaning less work for you and your accountant when it comes time to file tax.
MTDfb and your business
Moving towards all businesses (both above and below the VAT registration threshold) using online software to manage VAT returns by 2020, the first phase applies only to businesses currently over the threshold of £85,000 (for the 2018/19 and 2019/20 periods).
If your business falls under this category, or if you have voluntarily registered for VAT, then you are required to begin using approved software to file your returns as of April 1st, 2019 (if you pay Corporation tax).
Most online accounting software makes it easy to upload data, meaning you can go from Excel spreadsheets to approved software in a matter of moments.
Businesses or self-employed with a turnover under £10,000 will not need to adhere to MTDfb requirements.
Do you need to use software with MTDfb capabilities?
If your business is not yet over the threshold or VAT registered, it is not currently necessary for you to make the move to approved online software. However, many businesses prefer to be prepared and to switch earlier, or to ensure their current software meets the requirements for MTDfb.
Debitoor and MTDfb
Debitoor will be offering a direct integration with HMRC according to the regulations set out by MTDfb. We’ve spent time fully researching and communicating with HMRC in order to develop an integration that not only meets the requirements, but upholds our commitment to easy accounting.
Keep an eye out for updates here on our blog :).