Making Tax Digital
What Is Making Tax Digital?
Keeping in line with the digital trend that has taken over many industries, HMRC has also decided to bring their tax services online, in a scheme they are calling ‘Making Tax Digital’ (MTD). Their aim is to be a modern digital tax system where all tax liabilities are accessible in one place, bringing tax into real-time and making submissions more accurate. The benefits of this are that it should avoid overpayments & underpayments, meaning that fewer penalties are issued and less time is spent by companies resolving these common mistakes.
Who Will This Affect?
Any business or individual with an annual taxable turnover above the VAT threshold (£85k), will be required to submit their VAT returns through functional compatible software. The first VAT period to be affected by the new regulations will be from April 2019. If you are currently under the threshold but would like to move over to the scheme, you can voluntarily register with HMRC.
From 2020, further regulations will be rolled out to smaller businesses as the scope is widened and other taxes will be required to be submitted via the MTD software.
As a business or individual, you will be required to submit quarterly uploads to ensure your tax affairs are kept up-to-date through the recommended software. VAT spreadsheets can still be used but will need to be uploaded onto ‘bridging software’ to ensure that it complies with HMRC’s regulations, as their manual upload feature will be removed
How will it affect your business?
HMRC will not be providing their own software but will be working closely with software providers to find solutions on making MDT compatible. Compatible software that we highly recommend is Xero - we have information about its benefits here
There are two important steps that you must do in order to prepare for Making Tax Digital:
- Check to see if your business is above the threshold - annual turnover above £85k.
- Ensure that your records are uploaded onto Making Tax Digital Software - It is important that you go through the conversion process to ensure that all historical data is transferred onto the new software and kept up-to-date.
If you decide to maintain the records yourself, we strongly advise that you seek training on any of the software to ensure that you are using it to its full potential. This will enable you to benefit from real-time reporting and saving time as much as possible.
The biggest decision you will have to make at this stage is whether or not you keep the bookkeeping in-house or delegate it to an expert to save your time. As Xero platinum partners, we can go through and set your Xero up, maintain your records and ensure that all data is kept up to date. As part of our services, we will send you monthly reports and highlight any areas for concern and give any advice on how we can make your business thrive. We will also, of course, ensure that all MTD submissions are submitted on time.
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