Making Tax Digital (MTD)

Making Tax Digital for Business (referred to as Making Tax Digital, or MTD) is a government initiative all about making it easier for small businesses and their accountants, to manage and pay taxes.

It aims to provide you with an up to date view of your tax position and enables you to manage your finances more effectively.


All the major online accounting packages have fully integrated the process into their software and at Countess & Co we are ready and able to suggest the approach which will best suit your business, and then train and get you set up.

What MTD Really Means

  • All self-employed individuals, landlords and incorporated entities with business income over £10,000 will be required to keep digital records of all their income and expenditure and submit these records electronically to HMRC. Those in employment who have secondary income of more than £10,000 per year through self-employment or property will also be affected.
  • HMRC will not provide you with the tools for digital record keeping and submission. These will be offered through commercial software providers.
  • Those affected have the option to make the electronic submission in collaboration with their accountant or bookkeeper or can do this on their own.
  • Updates to HMRC will need to be made at least quarterly, taxpayers will have an option to pay tax based on their quarterly submissions, if they wish.
  • Any activity at the end of the year must be concluded and sent either by ten months after the last day of the accounting period, or by 31st January, whichever is sooner.

MTD - The Options

HMRC is being very flexible about the various options that may be used to comply with MTD.

Digital Accounts

For those tax payers already using supported accounting software (whether based on desktops or in the cloud), and agents running practitioner accounting software, the move to MTD-compatible software should be handled by your software vendor; they have been and continue to be in dialogue with HMRC to understand the requirements and deliver solutions for their customers in the appropriate timescale. Additional processes will be required for submitting returns quarterly.

Manual Books

One of the main issues with MTD will be the many businesses do not currently maintain digital accounting records, but will now be required to do so. Many of these may not even have computers in their businesses, although they may have access to smart devices (phones or tablets). For those that choose not to move to commercially-available software packages, HMRC has indicated that free software products, with free updates, will be provided for them.

Spreadsheets

The Government has confirmed that businesses will be able to continue to use spreadsheets for record keeping, but they must ensure that their spreadsheet meets the necessary requirements of MTD for business (such as passing relevant information across to HMRC every quarter), which is likely to involve combining the spreadsheet with software or upload apps. We will update our guidance as the requirements become clearer during pilot testing phase of implementation.

Big Business

Larger businesses will already be keeping detailed integrated accounting records, and because of the complexity of systems changes across divisions and possibly borders, will be entering the MTD programme last.

The requirement to file quarterly will necessitate additional processes to map data for HMRC returns that is normally only undertaken once a year; these processes could take several months to implement.
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