This means businesses who meet the VAT threshold will have to keep their records digitally and provide their VAT return through MTD compatible software.
The Four Foundations of Making Tax Digital
- Better use of information:
A significant benefit of MTD is that you will no longer have to provide HMRC with information that it already has or can get from elsewhere such as banks, employers, other government departments and more.
Having Digital Tax Accounts will allow you to see what information the HMRC holds on you, making it easy to check if everything is accurate and up to date.
- Tax in real-time:
You will be able to see how much tax you have accrued in as close to real time as possible to help prevent huge tax bills building up.
- A single financial account:
By 2020 you will be able to see all of the entitlements and liabilities you have in one online location.
- Interacting digitally with customers:
In addition to the single financial account you will be able to interact with the HMRC digitally through secure messaging, webchat and from digital record keeping software.
What Do I Need To Do Now?
Some businesses have already begun piloting this scheme however it will not be mandated until April 2019 when businesses over the VAT threshold will be required to keep digital records and provide quarterly updates to the HMRC.