As you will most likely already know, MTD or Making Tax Digital came into effect on the 1st of April this year. It’s a new HMRC initiative that should make it easier for businesses to file their VAT returns.
In a nutshell, Making Tax Digital or MTD means that all VAT-registered companies in the United Kingdom that have a higher taxable turnover than the VAT registration threshold (which is £85,000 per year) must make sure that:
• they can store digital records;
• they can provide data to HMRC and file VAT returns using HMRC’s API platform;
• they can also receive data through the HMRC API platform.
The new legislation is going to be implemented in two phases. The first phase, which came into effect 1 April 2019, requires all companies here in the UK to file all their VAT returns digitally via HMRC’s platform. Then from 1 April 2020,
which is the second phase, all financial transactions that involve VAT will need to be generated and recorded digitally and transferred electronically to a compatible finance system without manual manipulation.
Many of the accounting software companies like Sage 50, QuickBooks and Xero are already fully compliant with the new HMRC requirements. Additionally, if your company is using a travel booking and back office system that can already maintain a robust
audit trail of financial transactions and VAT returns and also export this data directly to one of those accounting platforms, then you are already compliant with the new MTD obligations. So you can just sit back and relax.
However, if your company is managing holiday bookings or invoicing manually or if you are still working with a noncompliant system, you can still get away with it for now, but it’s wise to start looking at compliancy now before the second phase
kicks in on 1 April 2020.