Making Tax Digital (MTD) was designed by the government to help individuals and businesses accurately keep track of their tax liabilities in a more efficient and straightforward way. By assisting companies to get their tax correct first time, the £9 billion discrepancy that the Exchequer faces each year, could be eliminated.
In an ever increasing digitally driven world, many businesses are already using accounting software, interfacing with their customers electronically and carrying out their banking online. Thus, HMRC saw MTD as the next step in becoming more modern and more digitally integrated with businesses and eliminate the existing laborious paper-based processes.
Following extensive consultation, the 1st April 2019 saw the introduction of MTD for VAT registered businesses (MTDfV) with a taxable turnover above the VAT threshold (£85,000). The new regulations require applicable businesses to keep records digitally and use software to submit their VAT returns.
For those businesses who are not VAT registered MTD will not come into force until at least April 2020.