Making Tax Digital



Making Tax Digital

From 1 April 2019 VAT record keeping is changing.

What is Making Tax Digital?

You may have heard the term “Making Tax Digital” (MTD), but what exactly does it mean?

If your business is compulsorily registered for VAT then HM Revenue & Customs (HMRC) will require it to:

Keep records of transactions in a digital format.

Submission of VAT returns in a digital format to HMRC.

What is a digital format?

HMRC are introducing new laws that businesses keep records on a computerised system, so will no longer be able to keep manual records.

A computerised format could be an appropriate accounting package such as Xero or Quickbooks Online (QBO).

It has been suggested that Microsoft Excel would qualify as an appropriate computerised system, but this would require a yet to be developed interface to transmit the information to HMRC. HMRC have suggested that the ‘Excel’ interface will be made available for free but they will not develop it and have left this to the software industry, who understandably are not keen to do something for free…..

I already submit my VAT return online….

A recent article in Tax Adviser magazine, suggested that whilst 99% of VAT returns are filed online, only around 12% of the VAT returns are submitted directly by accounting software. The remaining 87% are presumably manually entered into the HMRC gateway/portal.

Under the new MTD rules, VAT returns must be filed directly via the accounting software. Cloud packages such as Xero, QBO and Sage have this facility but at the time of writing no such interface has been developed to transmit information from an Excel spreadsheet to the HMRC gateway.

Why are HMRC doing this?

HMRC believes that the £8 billion tax gap (the difference between what they forecast to bring in to the Exchequer’s coffers and the amount actually received) exists partly due to errors and carelessness by businesses. In particular they believe that this is down to human input/intervention (such as transposition errors) and such errors would not occur if records were kept on a computerised system.


…..the plan is for all businesses to report details of their income and expenses quarterly to HMRC for both Income Tax and Corporation Tax purposes, taking the number of tax submissions (for these taxes) to HMRC to five a year rather than the current one each year.

There are also plans to request that landlords report rental income and expenses on a quarterly basis.

Are there any exemptions?

There are some though these are few and far between. Exempted businesses would need to prove that they cannot engage with computers for reasons of religion, disability, remote location or age.

The onus would be on the business to apply for an exemption and receive HMRC approval.

How can we help?

Given that HMRC are offering so little support towards the changes, we have been preparing for MTD for the last five years. Over that time, we have built a team known as Clive Owen Managed Services (COMS) headed up by director, Ian Jarvis.

Ian heads up a team of dedicated accountants working purely on book-keeping, management accounts and VAT returns for clients.

The team has extensive experience in the various ‘cloud’ accounting software packages which are available as well as the add-on applications that can supplement this revolutionary software.

The systems and assistance we can provide will not only assist you in meeting your obligations under the new MTD legislation but we can show how using such software can free up your time to get on with doing what you do best, running your business.

Call Ian today on 01325 349700.