Making Tax Digital (MTD) is a key part of the Governments plans to make it easier for individuals and businesses to get their tax right and keep on top of their affairs - ultimately paving the way to the end of the annual tax return for millions of individuals and businesses.
source: HM Revenue and Customs Research Report 480
The first businesses affected are those caught under Making Tax Digital for VAT (MTDfV) which came into force in April 2019.
HMRC's ambition is "to become one of the most digitally advanced tax administrations in the world, modernising the tax system to make it more effective, more efficient and easier for customers to comply."
There's little doubt MTD will bring a radical change for businesses.
Who became affected?
VAT Registered businesses with turnover above the VAT threshold (£85,000 excluding VAT).
How were they affected?
VAT transactions now have to be recorded digitally using apps and software & similarly the VAT Return itself also has to be submitted this way too! It is no longer possible to submit a VAT return through HMRC’s own VAT online services.
As of April 2020, the remaining VAT Registered businesses, (those of which who have voluntarily registered for VAT) with a turnover below £85,000 will be required to follow the same process.
As of April 2020+, with a start date still to be confirmed, self-assessment and corporation Tax will start to be rolled out to MTD, affecting sole traders, partnerships, landlords and trading companies. Likely the same reporting through digital software will be mandatory!