6 months until MTD compliance: What does compliance mean and is your business ready?

22nd October 2018

Recent research carried out by consulting firm RSM on behalf of YouGov shows that up to a third of qualifying businesses are unprepared for the forthcoming Making Tax Digital (MTD) legislation.

making tax digital compliance

The new MTD regulation from HMRC comes into force from 1stApril 2019 for all businesses with a turnover of £85,000 or more, of which there are around 2.5m in the UK*.  Data from the RSM study shows that as many as 880,000 of these VAT-registered businesses are currently unprepared for its introduction, with a lack of understanding about what compliance actually means.

What does compliance with MTD mean?

With only a few exemptions, VAT-registered businesses trading over the VAT threshold of £85,000 will be required to keep records in a digital format, ensure that the transfer or exchange of VAT information is digitally linked and submit their VAT return information to HMRC using MTD-compatible software.

It is important to understand the definition of “compatible” within the scope of this project.   To comply, the software must offer an API (Application Programme Interface), which allows it to communicate business financial data directly to and from the HMRC digital platform.  It is the responsibility of the business to ensure that the correct software is in place.

What is the deadline?

There is potential for a ‘soft landing’ period for MTD between April 2019 and April 2020, in which affected businesses will not be fined even if not filing records correctly. Importantly however, there is no extension for the implementation of API-enabled software, which all qualifying businesses must have in place by the compliance deadline.

John Forth, VAT partner at RSM, said, “With just six months to go before the rules come into force, there’s a worrying number of VAT-registered business that are completely unaware of the changes. And many of those that are aware have an awful lot of work to do to get ready.  VAT-registered businesses really need to make the next six months count, to ensure that their software, systems and people are all ready for the change.”

We have written detailed pieces on the MTD Project and, if you need a more detailed understanding of how your business can prepare for the MTD deadline, you can talk to one of our dedicated team today.

*according to the Office of National Statistics (ONS)

Chartered Accountants in Sunderland, offering expertise on everything from Tax and Business Planning,
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