MTD Now the Dust has settled
The start of mandatory reporting involving MTD for VAT came in on 1st April. Benjamin Dyer, CEO of Powered Now, looks at the current state of things in the MTD world.
What is MTD?
MTD (Making Tax Digital) is the digital program designed to drag HMRC and us into the 21st Century.
Under this program, every aspect of tax is scheduled to become digital and detailed records of all income and expenses are meant to be kept on computer. But things haven’t been going smoothly.
While we should now be in the midst of a massive MTD program, it has been temporarily cut back to only cover VAT. Don’t be fooled though, even if you don’t charge VAT you will be caught by MTD eventually. All businesses with sales of more than £10k will become subject to MTD and have to report their returns by computer. But this will be by 2021 at the earliest.
What is MTD actually about?
The primary aim of MTD is to close the “tax gap” i.e. collect taxes that the government thinks they are missing. It doesn’t take a genius to realise that once everything is held digitally this will enable HMRC to check for fraud using methods like artificial intelligence.
How is the introduction of MTD for VAT going?
The deadline for MTD for VAT means that VAT periods starting from 1st April must have their related return VAT made through MTD. So, if your last VAT period ended on March 31st, the first compulsory MTD VAT return will be on 7th August 2019.
MTD has been getting off the ground slowly. Tens of thousands of businesses had moved to MTD by 1st April this year, but that still left more than a million businesses still to go. With the final deadline for a return of 7th October for businesses that had a VAT period end of 28th February, this means a huge number of companies still need to get onto MTD.
If everyone waits until the last moment, we could see more than 330,000 businesses doing their first MTD for VAT return each month in August, September and October. That would be over 10,000 businesses a day, if spread throughout the month which it won’t be!
If people all delay to the last minute, it’s going to be pandemonium. The argument for adopting now is to avoid the mayhem. That’s even though the late summer mess is likely to be so bad that no one will be blamed for late submissions.
What are the choices?
There is a vast array of over 300 software solutions available for MTD, including one from my company, Powered Now.
There is one big choice to make, to either use “bridging software” or implement a permanent solution. Bridging software simply copies data into the MTD portal with minimal changes. Our advice is to implement a permanent solution now. That means that you won’t need to change things again when the exemption allowing bridging software is withdrawn. You will also avoid an even bigger shock when other phases of MTD come in and which won’t allow bridging.
What to do
If you are VAT registered and have not yet sorted out your plans for MTD for VAT, I suggest that you do so now. It’s likely to be a lot more frantic the longer that you leave it.