After coming into effect in April 2019, Making Tax Digital (MTD) is the biggest change in the UK tax system to be rolled out in recent times. 40% of UK businesses are now legally obliged to move away from paper-based accounting systems and implement new, digital accountancy software.

As MTD is a big change in how SMEs submit and store VAT-related accounts, HMRC have described ‘Making Tax Digital’s introductory year as a ‘soft landing period’, which they explain as a period ‘for businesses to have in place digital links between all parts of their functional compatible software’. Despite this, businesses are not safe from incurring penalties if they do fail to comply with the initiative during the 2019/20 tax year.

To help protect your business from MTD penalties, you’ll need to ensure that your organisation:

• keeps digital records
• signs up after you’ve got compatible accounting software
• submits returns using this software

Unless your business is in the 2019 deferral group, or your taxable turnover is under £85,000, your organisation should already be complying with the regulations of MTD.

In addition to progressing HMRC’s ambition to become more digitally advanced, MTD is an integral part of the government’s plans to make the tax system easier for businesses navigate and to and keep on top of their affairs. It is important that businesses recognise not only the importance of these changes, but also the positive impact that Making Tax Digital will have on the VAT returns process.

The implementation of Making Tax Digital is already making pivotal changes to tax administration and is expected to extend its reach to include Income Tax and Corporation Tax in the coming years, though this is yet to be confirmed.

If you are a business in the Yorkshire area and would like to find out more about getting the most out of Making Tax Digital in your business, please do not hesitate to contact Lima Accountancy’s team of experienced accountants for advice. Call us today on 0113 844 0402.