Key facts:
MTD for VAT returns are calculated exactly the same way as the current 9 Box return. The two differences are:
Fuller explanation:
The Making Tax Digital initiative is the latest step in a series of government measures designed to support small businesses and improve their performance. Although it will initially apply only to VAT-registered businesses, the initiative is expected to affect all businesses in time. For self-employed individuals and landlords who make over £50,000 in a year, the implementation date will be April 2026 and for those with sales more thn £30,000, 2027.
The MTD initiative aims to simplify the preparation of tax returns and reduce the workload for taxpayers. The implementation of MTD for VAT will completely digitalise the process by the end of 2021. Companies should ensure they use a software solution that is compatible with MTD.
The mandatory submission process has been called the 'digital journey' by HMRC. This will prevent data entry mistakes that could potentially cause penalties. During the soft-landing period, HMRC will not penalise businesses that do not have fully-digital records.
Virtually all later phases of the MTD project will need more complex calculations.
As an additional benefit, MTD will free up time by enabling business owners to take real-time business decisions. They will have an easier time planning and budgeting for potential tax liabilities. Additionally, this system makes it easier to interact with HMRC in real-time, allowing direct communication with them. Moreover, the digital format allows business owners to share information at any time. So, it's a win-win situation for businesses and government agencies.
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