Digital tax is here: what you need to know

From this month, more than one million VAT-registered businesses are required to file and report digital VAT returns using HM Revenue & Customs’ (HMRC) new programme, Making Tax Digital (MTD).
Under MTD, almost all VAT-registered businesses earning above the VAT threshold (currently £85,000) will need to keep their records digitally and submit their VAT return using MTD-compatible software for VAT periods starting on or after 01 April.
Almost four years in the making, MTD for VAT is set to radically change corporate reporting for the good. However, with so few businesses familiar with the new requirements, HMRC has implemented a ‘soft landing’ approach in the first year of VAT mandation. During this time, businesses who are “doing their best to comply” with MTD will not be issued with penalties for mistakes and errors.
Commenting on the new system, Theresa Middleton, Director of the Making Tax Digital for Business Programme, said: “Tens of thousands of businesses joined our pilot over the last six months and have helped us to test and improve the live service ensuring we have the right support in place to help people transition.
“Now is the time for those businesses affected by MTD who haven’t done so already to begin preparing to switch over and start experiencing the benefits MTD has to offer.”
Ms Middleton added that businesses don’t necessarily need to sign up from day one, but they do need to make sure they’re keeping records digitally for their next VAT period which starts on or after 1 April.
Remarking on the benefits of digital reporting, Emma Jones, founder of small business support network Enterprise Nation, said: “Encouraging small firms to adopt more digital functionality offers real benefits. For example, having accurate and timely financial information to hand helps companies make better, more informed decisions and using digital tools more broadly, including time management, helps businesses increase productivity.”
If you have yet to prepare for MTD for VAT or if you need help filing your first digital return, please get in touch with our expert team.

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