Overview of Making Tax Digital
Making Tax Digital (MTD) is an initiative of UK government in order to revolutionise its taxation system and become one of the most advanced tax authorities in the world. The intention behind the introduction of Making Tax Digital is to make the tax system more effective, efficient for the tax payers. MTD transformations projects are taken care by the Her Majesty’s Revenue and Customs (HMRC) and it sets out a vision for the end of the tax return and a transformed tax system by the year 2020.
Making Tax Digital will affect not only the individuals but also the businesses and other organizations and agents; and how they maintain their accounting and tax records as well their communication with the HMRC, which is of the belief that this new and improved tax system will require the majority of business owners and organizations to maintain digital records using the compatible software. HMRC is also working closely with various developers in order to develop accounting software to have an easy and smooth switch to digital tax.

Introduction to Making Tax Digital for VAT
HMRC is all set to launch Making Tax Digital in April 2019 which is also its one of the most ambitious plan under which every VAT registered business which is over the registration threshold will be required to submit their VAT returns digitally, with minimal or no human intervention. However, before Making Tax Digital becomes an integral part of everyone’s life in the United Kingdom, HMRC needs to look into following challenges which a businesses and agents might face while switching to Making Tax Digital:
Also Read: VAT Registration
Challenges while switching to Making Tax Digital:
Software Provider/ Software | Who Can Use This | Features |
---|---|---|
@gosimpletax | Agents and businesses | Digital record keeping Submit VAT return View VAT return View VAT liabilities View VAT payments |
aaaDataX | Agents and businesses | Submit VAT return (bridging software) View VAT return View VAT liabilities View VAT payments |
Abratax | Agents and businesses | Submit VAT return (bridging software) View VAT return View VAT liabilities View VAT payments |
Deloitte VAT | Agents and businesses | Digital record keeping Submit VAT return (bridging software) View VAT liabilities View VAT payments |
FreeAgent | Agents and businesses | Digital record keeping Submit VAT return |
IRIS | Agents | Digital record keeping Submit VAT return (bridging software) View VAT return View VAT liabilities View VAT payments |
My Digital Accounts | Agents and businesses | Digital record keeping Submit VAT return View VAT return View VAT liabilities View VAT payments |
Oracle NetSuite | Businesses | Digital record keeping Submit VAT return View VAT return |
PWC Spreadsheet | Agents and businesses | Submit VAT Return (bridging software) View VAT return View VAT liabilities View VAT payments |
Tax Automation | Agents and businesses | Digital record keeping; Submit Vat return View VAT return View VAT liabilities View VAT payments |
When will the changes happen to Making Tax Digital?
HMRC in its Making Tax Digital proposal has given a roll-out plan over a time frame of 4 years i.e. starting from April 2107 till April 2020 as described below:
- April 2017: Private pilot of roll-out starts.
- July – December 2017: To give an overview of taxpayers liabilities in one place and private pilot of Making Tax Digital for VAT in another.
- Spring 2018: To start with live pilot of Making Tax Digital for VAT.
- April 2019: In order to give businesses (whose turnover is above the VAT threshold) a first-hand experience of Making Tax Digital initiative, they have to maintain their records manually and also submit their quarter returns for VAT purposes only through their accounting software.
- April 2020: HMRC aims to widen the scope of Making Tax Digital by making it a vital and indispensable part of every business and their advisers.