I am adding updates here on developments in the move towards Making Tax Digital (MTD)
MTD for VAT
From April 2019 VAT-registered businesses with turnover above the VAT threshold (£85,000) have had to keep digital records for VAT purposes. This means either using a full accounting software package, or keeping bookkeeping records in a spreadsheet, and using ‘bridging software’ (less expensive than accounting packages) to transmit the final information to HMRC. The final information is no more than HMRC would normally receive (the full bookkeeping records are not transmitted – although HMRC will have a right as they do now to ask to see these, invoices, bank statements etc).
Invoices and receipts may still be kept on paper if preferred.
For VAT-registered businesses trading below the £85,000 threshold, the new system is optional for the time being.
After difficulties with getting a small number of clients’ MTD services set up (seemingly random glitches while the new system started) the first year of MTD has gone reasonably smoothly.
Digital income tax returns
These will not be brought in for the time being. HMRC does still intend some move in this direction in future.