FAQs: Making Tax Digital
What is Making Tax Digital (MTD)?
Making Tax Digital is the government’s plan to modernise and digitalise the UK tax system.
The government’s ultimate intention is that:
- HMRC will collect and process information affecting tax liabilities as close to real time as possible;
- All taxpayers will have digital tax accounts, where they will be able to see all the information that HMRC holds, and keep abreast of their tax position throughout the year.
It will take time, but ultimately Making Tax Digital will lead to the biggest revolution in the administration of the UK tax system for decades.
What are the requirements?
The new regulations mandate that businesses must keep digital records in compatible software, which can connect to HMRC via an Application Programming Interface (API).
- Business-related transactions must be recorded digitally using MTD-compliant software or apps.
- Records kept on apps or software not designed for MTD will no longer be compliant.
- Tax returns must be submitted in a digital, MTD-compliant way.
- Tax returns submitted by post or using HMRC’s own online services will be phased out.
What needs to be recorded digitally?
For VAT purposes, there is a specific list of information that will need to be maintained digitally. This includes, amongst other things, the value of each supply made and received, the rate of VAT charged on each supply made, and the VAT that will be re-claimed on each supply received (with some relaxations for retailers and a few others).
When does MTD start?
- April 2019 VAT (phase 1)
VAT registered businesses with turnover above the VAT threshold (currently £85,000 excluding VAT).
- April 2020 VAT (phase 2)
The remaining VAT registered businesses – those voluntarily VAT registered with VAT-able turnover under £85,000.
- April 2020+ (Corporation tax & self-assessment)
Sole-traders, partnerships, landlords and trading companies. The start date will be confirmed by the government following the successful roll out of Making Tax Digital for VAT.
Will MAM Software applications become MTD compliant?
Yes. We have already begun a development project to add the required functionality into our Autopart, Trader and Autowork Online applications. This will include:
- Processes necessary to direct users to the HMRC website to register for MTD (HMRC mandates that this process is repeated every 18 months).
- An API call to HMRC to establish the periods for which the next VAT return should be submitted.
- Functionality to derive the figures from Autopart/Trader or Autowork Online necessary for the VAT return..
- Functionality to submit VAT returns digitally to HMRC.
- Retention of the data relating to previous VAT return submissions.
When will MAM Software applications become MTD compliant?
We have undertaken a successful demonstration of the MTD functionality (integrated within Autopart/Trader) to HMRC. The demonstration involved granting authority to Autopart/Trader to submit a VAT return, obtaining dates of the next VAT return from HMRC and submitting a VAT return electronically from Autopart/Trader.
Autowork Online software has also completed its HMRC review and we will begin live pilot trials imminently.
MAM Software is listed on the HMRC website as a pilot supplier. This means we have:
tested our products in HMRC’s test environment
already demonstrated a prototype of our software to HMRC
We are currently looking for companies to take part in pilot trials of our software. To be eligible, your next VAT return must be due in January to March 2019 and you must be using one of our MTD-compliant systems. Please contact MAM Software if you are interested in taking part.
Will my system be compliant?
MTD requires all communications with HMRC to support Transport Layer Security (TLS) 1.2. It is not possible for us to achieve this level of security on our older applications and operating systems, which means your software may need to be upgraded.
The table below shows which of our products will be compliant with MTD and those which will require an upgrade. If you are unsure of whether your software will be compatible, do not hesitate to get in touch.
How does MTD affect my privacy?
In accordance with HMRC fraud prevention requirements, we will include information about your local system in our communications with HMRC. If you require further information regarding the data we provide, please contact HMRC directly.