A guide to Making Tax Digital for businesses

 Making Tax Digital (MTD) is HMRC’s initiative to digitise tax. From April 2019 all businesses with a turnover over £85,000 will need to submit their tax returns via the HMRC gateway. To deliver this the right software needs to be in place to make it happen. Datel and Sage are here to help you to prepare for Making Tax Digital so that you can focus on running your business.

MTD for business applies from April 2019 and HMRC are writing to businesses now to explain what MTD is and why you need to be preparing. If you’ve not yet received a letter from HMRC, here are some of the basics.


 What are the proposed revisions?

The proposed revisions for the legislation are as follows:

  • Digital Record Keeping – all records of trading and transactions should be kept digitally, with help from guidance in the associated software
  • Establishing Taxable Profit – businesses should record accounting and tax adjustments for the purpose of arriving at taxable profit
  • Provide HMRC with updates – quarterly updates will be provided to HMRC, with the level of detail set out by the rules of legislation
  • ‘End of Year’ Activity – finalising the taxable profit for a period, which will apply 10 months after the 4th quarter

Who needs to use the new digital service?

Businesses, the self-employed and landlords will all be required to start using the new digital service from:

  • April 2019 for Income Tax and National Insurance Contribution (NICs) purposes, if your turnover is over the VAT threshold
  • April 2020 for Income Tax and NICs purposes, if your turnover is below the VAT threshold
  • April 2020 for VAT purposes for everyone who is VAT registered
  • April 2020 for Corporation Tax (CT) purposes for everyone who pays CT

However, it is important to note, there are some exceptions. Businesses, self-employed and landlords with a turnover under £10,000 are exempt from the MTD requirements. Those who cannot get online due to genuine reasons, such as disability or geographical location, will also be exempt from these obligations.

Why are we changing to MTD for businesses?

The main reason for the change is to lower costs for businesses. The latest tax gap figures published by HMRC show that businesses are finding it hard to get their tax right, with many using an agent to help them. As a result, £8 billion a year in tax is becoming lost due to avoidable errors. The new scheme is being put in place to help businesses avoid these errors. By offering a clear way to log information, the scheme is expected to remove around 10% errors – on an ongoing basis – and will help businesses to view their tax position more clearly. They will be able to meet their tax obligations, with minimum cost and disruption.

The change is also intended to make tax a more modern, digital experience. The HMRC is attempting to become one of the world leading tax authorities, moving into the modern world with this digital initiative. If businesses can keep on top of their tax affairs, it brings an end to the stressful annual tax return for millions of people.

Who will be affected by the changes?

The changes are going to affect most businesses and hopefully in a positive way in the long run. Ultimately, the changes will bring efficiency for businesses which will reduce errors and some information obligations they have been subjected to in the past. The aim is to move the focus away from gathering and inputting data and move it towards reviewing the updates put in place by the software and making amendments.

The new obligation to provide quarterly updates is thought to reduce the burden of yearly reporting. Individual partners in partnerships also will no longer have to provide separate details of their share of profit or losses from the partnership, saving agent fees where they were previously needed.

Agents acting for businesses are also likely to be affected, this is because the average business owner may find it easier to do the job they once had an agent employed to do. Fortunately for the agent, this creates space to focus more intently on higher value business activities.

Will there be any transitional costs for businesses?

The cost of transition to a digital way of working will depend on each business’ current set up and requirements. That’s where Datel can advise and support the transition and what is required by understanding your business needs and future plans. Our focus is to ensure your technology is compliant and supports your requirements so your can focus on your business.

It’s important to remember, one of the main aims of this initiative is to save money for businesses. Making Tax Digital for Businesses will become a money-saving strategy over time.

How can Datel and Sage help with MTD?

If you would like any further information on MTD for businesses, how the planned changes will affect you and your business, and the software that will be required, please feel free to get in touch with our team of experts – here at Datel. We demonstrate a wealth of knowledge in this area and we’re always on hand and happy to help. Simply give us a call on 0800 0775 888.