What is MTD for VAT and which businesses are affected?
MTD stands for “Making Tax Digital” and it is radically changing the way tax submissions and payments are to be instigated in the future. MTD for VAT began on April 1, 2019 but this is just the start and the first implementation.
It is not designed for companies to make for convenience (although the MTD for VAT software is very user friendly and does not require a great deal of training), it is a mandatory requirement stipulated by HMRC (Her Majesty’s Revenues and Customs Department).
HMRC has long desired to become the world leader in tax administration. MTD for VAT is just the start of what will be a tax submission and record-keeping revolution. At present, just businesses with a turnover of £85,000 or more will have to submit tax returns digitally using software that is HMRC-compliant.
There are many software companies that have worked extensively with the HMRC to create software that is just perfect for the job and approved by the taxman. Some software firms have been working in collaboration with HMRC so these tech businesses can sell software that businesses absolutely have to comply with.
There are still some exceptions at the moment, but over time, these will fade. There are a number of local authorities, traders based abroad, non-profit organisations, VAT divisional entities and groups, charities, public offices, NHS Trusts and organisations with a more complex situation when it comes to paying VAT. These groups have been given until October 1, 2019 to comply.
Eventually HMRC will bring into line businesses earning under £85,000 turnover into the MTD for VAT program. Moreover, in the future, even individuals will have to submit tax returns through this manner.
MTD for VAT is not something that can be avoided. There are penalties for non-compliance and it should not be feared either. Using MTD for VAT is not a rocket science and is deliberately created to be a user-friendly system requiring the very bare minimum of training.
Accountants and taxation personnel will readily pick up the requirements and is widely expected that departments will wonder how they ever did without a program like MTD for VAT. It is an essential piece of software to own, so rather than oppose it, it is better to regard it as a necessary evil, which has a bark far worse than its bite.