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What is Making Tax Digital?

Posted on 20 Nov 2018 - Making Tax Digital

Making Tax Digital (MTD) is part of HM Revenue & Customs (HMRC) wider digital strategy to make it easier for individuals, businesses and other organisations to ensure their tax affairs are in order.

The driving force behind MTD is the belief within HMRC that taxpayer errors result in a significant proportion of the tax gap, the difference between the tax paid and tax due, and that poor record keeping is a major contributing factor to these errors.

MTD will therefore require businesses, other organisations and individuals to keep their records digitally, using either bookkeeping/accounting software or at the very least on spreadsheets. By doing so, HMRC believe that errors will be reduced and, with them, the tax gap.

The use of digital records is to be backed up by the need to make quarterly submissions to HMRC, which must be directly via software as opposed to paper forms or via the HMRC website.

For VAT the MTD submissions will replace the current VAT returns and will again need to be through software. You will not be able to file your VAT return using the HMRC website, unless you are covered by one of the exclusions or exemptions.

Please note that MTD for VAT does not change the frequency of your VAT returns nor the availability of any specialist schemes, e.g. the retail scheme.

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