An Introduction to HMRC Making Tax Digital – MTD
Making Tax Digital is a key part of the government’s plans to make it easier for individuals and businesses to get their tax right and keep on top of their affairs. The HMRC MTD project will replace the existing taxes management systems with a single fully integrated platform that will manage all of your taxes in one system.
Integration to 3rd party solutions like the Rhino Small Business App will make it easy for customers to fulfil their tax obligations with just a few clicks.
The new MTD platform will provide customers with greater visibility of their Tax liabilities. Customers will see how much tax you owe and thereby avoid the nasty shock of receiving a Tax demand that you were not expecting. The improved visibility, especially down to a transaction level will also help to ensure that everyone pays their fair share of Tax. The Small Business Sector is the cornerstone of the UK economy and it is therefore important that businesses adopt new technologies like the Rhino Small Business App so that they can work smarter. This initiative will businesses to become more competitive by reducing administration, reducing paperwork and also reducing the stress of fulfilling their tax and yearend reporting.
MTD for Income Tax
The first phase of the MTD platform that enabled Small Business Owners to use software to submit Income Tax updates went live in March 2017 and requires customers to keep a digital record of their income and expenditure transactions. This process is currently voluntary and has not yet been mandated.
Rhino Software Limited worked closely with the HMRC development team during this project so that our customers can avoid completing the online Self-Assessment Tax Return. In addition to the process taking seconds to complete using the Rhino Small Business App, customers also have the comfort of knowing that the summary figures submitted to HMRC are based on the detailed transactions recorded in the Rhino Small Business App.
Although it is currently a voluntary process, we believe that customers should embrace MTD for Income Tax for positive reasons and not because they have to. Rhino customers were the first to make submissions during the MTD pilot in June 2016 and also the first customers to make submissions to the MTD platform when it went live in March 2017.
MTD VAT Submissions
The second phase of the MTD programme is where HMRC is introducing changes to the way businesses need to manage their VAT records and send in their VAT return. Unlike Income Tax, the changes to VAT, for VAT registered business with a turnover above the VAT threshold, is mandatory. These changes take effect from 1st April 2019 and will require: –
- Businesses must keep their VAT records digitally.
- Businesses must send HMRC the VAT return through MTD compatible software.
HMRC started a pilot in the Autumn 2018 where businesses who signed up kept digital records of their Income and Expenditure transactions. They then, on their normal due dates, sent their VAT return to HMRC using software. The pilot was primarily to help HMRC test the new system, but it also gives those businesses that volunteer early access to what most will have to do anyway from April 2019.
The key benefit of using the Rhino Small Business App is that you can now complete your VAT Submission with a few clicks from within the App. Each submission is linked to the underlying Invoices and Expense, thus minimising the possibility of errors in the submission process and ensures compliance with the new regulations.
MTD will require Change
Whilst MTD has many benefits, we recognise that it will require both customers and Accountants to change the way they work and also, that different people react differently to change. As an example, whilst lots of people embraced the smart phone when it was first launched, not everybody would have been happy if they had been required to use it… yet here we are today and most people would be lost without their smart phone.
The rollout of the MTD platform will encounter similar challenges but we believe that the timing is good. Partnering with products like the Rhino Small Business App on your phone means that MTD is highly and readily accessible, something is essential to its widespread adoption.
Recording their Income and Expense transactions electronically in the Rhino Small Business App, will reduce administration, reduce paperwork and also the stress associated with completing last minute Tax and Year-End Accounts. However, customers will no longer be able to provide their Accountant with a plastic bag full of paper Invoices and Expense Receipts at the end of the year.
We recognise that most Small Business Owners are not Accountants which is why we developed the ‘Rhino Accounting Hub’ which gives your Accountant access to your data so that they can double-check everything and do the submissions on your behalf if required.
The MTD initiative presents a great threat to firms that do not evolve and equally great opportunities for firms that do embrace the benefits of MTD.
If the record keeping process is now carried out by the client, MTD provides an opportunity for Accountants to build a different type of relationship with their customers.
Rather than processing paperwork after the year end which one Accounting firm described as ‘driving through the rear-view mirror’, Accountants will be able to work with their customers on an ongoing basis and to lend their resources to proactively help them grow their businesses. The ‘Rhino Accounting Hub’ will also let customers find you and will provide you with live access their data.
The Rhino Small Business App to help you to comply with MTD and will transform the way you, freeing up valuable time for you to focus on what you enjoy and removing the biggest negative experienced by Small Business Owners, staying on top of administration and paperwork.