Making Tax Digital (MTD) has been active since the 1st April 2019, however it is still on many people’s minds. On the 3rd April, two days after the Making Tax Digital deadline, only 4% of the country’s businesses mandated to join had signed up. In addition to this, just 2% of accounting firms had registered clients for MTD, from an estimated 72,000 UK tax agents.
A freedom of information request that was carried out recently revealed some further statistics on MTD…
- 55,250 businesses have registered for MTD out of 1.2m.
- 13,427 businesses were signed-up by agents, meaning the majority of businesses signed up themselves.
- 88% of VAT registered businesses with a turnover above the VAT threshold use an external agent to manage their tax affairs.
- 1,679 agents have signed up clients to MTD. HMRC estimates there are 72,000 agents acting for clients in the UK.
- HMRC reckons about 4,000 businesses a day are signing up to MTD
Evidently there has been a poor uptake of Making Tax Digital across the country, but why has the scheme been put into place?
Making Tax Digital is not just an initiative to save the government time and money. Instead, it was built to establish these four foundations:
1. “Better use of information”
Customers will be granted access to check and edit the information held on them by HMRC. Equally, HMRC will be able to access information related to that customer from other sources, such as employers and banks.
2. “Tax in real time”
With increased efficiency comes the ability to check the amount of tax that clients owe throughout the year, rather than waiting for year-end. Everything will be done in real-time, increasing accuracy and efficiency.
3. “A single financial account”
With everything in one place, in 2020, for the first time, customers will be able to access a comprehensive singular picture of their accounts.
4. “Interacting digitally with customers”
Filing taxes aren’t the only thing that will be digitised. In fact, the way in which HMRC interacts with customers and provides support will be further digitised. From webchats to online support feeding into one system of digital record keeping, nothing will ever get lost in the paper trail again!
Five questions on our minds:
“Do I need to sign up for MTD?”
It may seem a simple question, but there are businesses unaware of the necessity to sign up. Most VAT registered businesses with a taxable turnover above ￡85,000 must follow the rules for Making Tax Digital for VAT and sign up.? This needs to be done at least 72 hours before your VAT Return is due.
“Do I need to buy expensive new software to allow me to make the MTD submissions?”
The answer is no. HMRC accepts that bridging software is an important form of digital transfer and these software’s are essential to enable linking from user’s current software and spreadsheets to MTD. HMRC has a list of accepted software here.
“What do I need to record for MTD?”
There are three main things – Business records, supplies your business makes and supplies your business receives. HMRC has a comprehensive list of what needs to be recorded here
“Once I’m signed up for MTD, can I revert to the original submission method?”
Once you have submitted your first MTD VAT return you cannot go back to the old VAT submissions, even if you fall below the VAT registration threshold. The only way to leave is to de-register for VAT.
“How difficult is it to sign up for MTD?”
After the initial pilot period, HMRC have improved its method of registration. For business, they offer a step by step set of instructions here.
MSP is already signed up as an agent for our MTD clients. If you have any further queries regarding signing your business up to MTD get in touch by contacting our Head of Accounting Support, Alex, at email@example.com or on +44 (0)1252 733683.