Embracing Making Tax Digital
What It Means for Your Business and How Cutts & Co Accountancy Can Help
In the ever-evolving landscape of tax compliance, the UK’s Making Tax Digital (MTD) initiative has been a significant focus for businesses and accountants alike. Introduced by HM Revenue & Customs (HMRC), MTD aims to digitalise the tax system, making it more efficient, accurate, and streamlined.
Here is a comprehensive look at what MTD entails, its implications, and how Cutts & Co Accountancy can assist you in this transition.
What is Making Tax Digital
Making Tax Digital is a government scheme designed to compel businesses to manage their tax records digitally.
This involves using compatible accounting software to keep tax records, submit tax data, and make payments. Currently, MTD is mandatory for VAT-registered businesses with a taxable turnover above the VAT threshold, which was implemented starting from April 2019.
Key Requirements of MTD
Digital Record Keeping
Businesses must maintain their accounting records digitally, ensuring there are digital links between different parts of the records.
Digital Submissions
VAT returns must be submitted via software connected to HMRC through an API, eliminating the option of manual submissions via the HMRC website or on paper.
Phased Implementation
MTD is being rolled out in phases:
VAT
Mandatory for most VAT-registered businesses since April 2019, with voluntary VAT registrations included from April 2022.
Income Tax Self Assessment
Scheduled to start from April 2026 for sole traders, partnerships, and landlords.
Corporation Tax
The implementation date is yet to be specified.
Costs and Considerations
One of the significant concerns for businesses is the additional cost associated with MTD.
Here are a few key points to consider:
Software Costs
Businesses need to invest in MTD-compatible accounting software, which typically involves a monthly subscription fee. While these fees are generally affordable, ranging from £10 to £20 per month, they can add up, especially for smaller businesses.
Upfront Costs
A recent report by the National Audit Office highlighted that HMRC omitted significant upfront costs to customers from their business cases. These costs, estimated at £1.5 billion, include updating systems and obtaining tax advice, which could be a substantial burden for some businesses.
Benefits of MTD
Despite the initial costs and challenges, MTD offers several benefits:
Improved Efficiency
Digital record-keeping and submissions reduce the likelihood of errors while streamlining the tax compliance process.
Enhanced Accuracy
Automated processes minimise the risk of human error, leading to more accurate tax returns.
Additional Tax Revenue
HMRC estimates that MTD will generate an additional £3.9 billion in tax revenue from VAT and Self Assessment business taxpayers with incomes over £30,000 over a five-year period.
Support from Cutts & Co Accountancy
At Cutts & Co Accountancy, we understand the complexities and challenges associated with MTD. Here is how we can help you transition smoothly:
Software Selection
We can guide you in selecting the right MTD-compatible accounting software that fits your business needs and budget.
Training and Support
Our team provides comprehensive training and ongoing support to ensure you are comfortable with the new digital systems.
Compliance Assistance
We will help you comply with all MTD requirements, from setting up digital links to submitting VAT returns accurately and on time.
Cost Management
We can help you manage the upfront and ongoing costs associated with MTD, ensuring you make the most of the benefits while minimising the financial impact.
Conclusion
Making Tax Digital is a significant step towards modernising the UK’s tax system, but it comes with its own set of challenges. By understanding the requirements, costs, and benefits, and with the right support from Cutts & Co Accountancy, you can ensure a seamless transition and maximise the efficiency gains offered by MTD.
If you have any questions or need assistance with implementing MTD for your business, do not hesitate to contact us.
Our expert team is here to help you navigate this digital transformation and ensure your business remains compliant and efficient.
