Making Tax Digital
Millions of businesses are already banking, paying bills, and interacting with each other and their customers online. Making Tax Digital (“MTD”) was introduced by HMRC and was intended to help businesses to get their tax bills right first time and reduce the £8 billion tax gap resulting from avoidable errors.
MTD for VAT launched in April 2019 and constituted a major change to how VAT data is reported to HMRC by businesses and agents. BASDA supported its members through the transition period as they developed their solutions and educated their customers so that they were ready to meet their obligations. BASDA had an important role in collaborating with HMRC to ensure that the initial roll out was successful and continues to work closely with HMRC to support their API strategy and deliver continual improvements.
Become involved now with the BASDA MTD campaign to help your business and customers alike.
“Without BASDA’s focus and contribution, work and investment of their members, MTD would not happen. Collectively, you are essential to every accountancy firm and their ability to work, by creating the digital link between HMRC, taxpayers and businesses.”
What does it mean for our members?
If you are VAT registered then you are required to keep digital records (i.e. use software to record all your VAT invoices and receipts). If you are not VAT registered then digital record keeping is optional. However, these business owners can gain updated income tax estimates whenever they want, which will help with cash flow forecasting.
If you are VAT registered and do not yet use software to record your VAT information (invoices to customers and from suppliers) this has been mandatory since April 2019. More information can be found on GOV.UK.
Making Tax Digital Commitment from BASDA
We continue to be the voice of our members and are actively involved in discussions with HMRC and are working closely with them on this topic.
This is a great example of BASDA working for its members towards making changes new regulation that would have been onerous on our customers and difficult for our members to change on their software. BASDA has been involved behind the scenes from an early stage influencing the direction of discussion on Making Tax Digital.
” The government has listened to concerns raised by parliamentarians, in particular, the Treasury Select Committee, businesses and professional bodies about the pace of change and is taking steps to ensure a smooth transition to a digital tax system.“
We are committed to helping our members achieve the best result for their business and customers.
MTD – Vital to get it Right
HMRC’s stated aim is to “become one of the most digitally advanced tax administrations in the world”. MTD is a key component in this strategy. The ambition is to modernise the tax system via the digital keeping, collecting and transferring of tax-related data so that it is easier for individuals and businesses (including micro-businesses, self-employed and landlords) to get their tax calculations and payments correct.
BASDA, as the collective voice for industry, can ensure that MTD has the best chance of being rolled out successfully and on schedule. We can do this through:
- Access to BASDA’s extensive experience of collaboration
- Sharing of information gained by the group of business software developers so that product management and development resources can be used most efficiently and cost effectively
- Discussion between developers on approaches to MTD development and testing
- Collective feedback and questions on MTD from the group to HMRC – rather than from individual organisations
- Representation through BASDA with HMRC at regular meetings and updates
MTD is an extensive project with ambitious milestones.
MTD goal was to deliver ‘a transformed tax system’ by 2020, with a timetable of steps and deliverables for business and individuals along the way.
After a number of concerns about the pace and scale of change were raised regarding the roll out of MTD for business, it was revised to give organisations more time to adapt and implement the changes.
MTD for income tax enters its public beta testing phase for sole traders with income from one business.
Software providers have only 3 quarterly VAT return opportunities to get MTD testing right before MTD begins.
The Chancellor confirmed in his Spring Statement that the government will not be mandating MTD for any new taxes or businesses in 2020 ruling MTD out until 2021 at the earliest.
Businesses above the VAT threshold mandated to keep their records digitally.
Soft landing period initially scheduled to end in April 2020 is delayed until April 2021. VAT returns require ‘digital links’ to be maintained as part of the VAT submissions after soft landing period ends.
Collaborate with BASDA to make MTD a success
Join the BASDA discussion and collaboration with business software developers to share information on MTD topics such as testing, deadlines and deliverables including:
- The status of MTD testing and success of pilot submissions
- Testing approaches
- Submissions coming from core applications or via add-on “modules”
- Error Handling
- Working with HMRC Account Managers
- Handling customers submitting directly via our software vs those submitting via a 3rd party