MTD: What’s It Really All About?

Most businesses and personal taxpayers should by now have noticed HMRC’s rollout of Making Tax Digital (MTD). Different colours of Government have tinkered with the timing of the introduction of this new tax administration system, but not the direction of travel.

Above: Xero’s recently launched version of what a new ITSA quarterly return might look like

The launch is working its way through the taxes, starting a few years ago with VAT, about to include income tax (see image above for Xero’s recently launched version of what a new ITSA quarterly return might look like) and scheduled to conclude with corporation tax in a few years’ time.  The stated aims of MTD, to make financial record keeping and interaction with HMRC totally digital, are hard to argue against, but what might it also really be about?

• Giving Government more up to date financial information gives them the opportunity to assess taxes and correctly pay out benefits quicker.
• An early rumour after MTD was first floated as an idea was that HMRC would then be able to connect onto your accounts data, and have a ‘look around’ without your consent or knowledge. This always sounded like scare mongering.
• As with all digital initiatives, MTD will enable HMRC to reduce headcount and rely more on AI. This should reduce tax collection costs.
• This could be an initial step towards mandatory e-invoicing for sending out all B2B sales invoices.

When MTD was first muted, our profession nicknamed it Making Tax Difficult. There remains an element of truth to this, as MTD for ITSA in particular, is going to force computerised book-keeping and submitting tax returns electronically on a cohort of personal taxpayers many of whom are unfamiliar with and totally uninterested in learning this new process. If this is you, speak to one of us, as we can help.

Don’t forget you might actually discover some benefits from computerising your book-keeping:

• The ability to generate reports to see how you are doing,
• As with all cloud hosted systems, your data will be automatically backed up and accessible from all locations,
• Automation of some current manual tasks such as capturing bank transactions and sending out sales invoices.

Get In Touch

For more information on MTD or to discover how we can help you with the move to Making Tax Digital, contact your local Whitings LLP team today.

Disclaimer - All information in this post was correct at time of writing.