Making Tax Digital
Making Tax Digital for VAT requires VAT registered businesses with taxable turnover above the VAT registration threshold (£85,000) to keep records in digital form and file their VAT Returns using software.
It is increasingly common for business records and accounts to be kept digitally, in a software program on a computer or tablet, or in a smartphone application, or maintained through such a device and stored using a cloud-based application.
What is different?
The difference under Making Tax Digital is that the software which businesses use must be capable of keeping and maintaining the records specified in the regulations, preparing their VAT Returns using the information maintained in those digital records and communicating with HMRC digitally via our Application Programming Interface (API) platform.
What your software must be doing under MTD?
If your digital records are up to date, software will be able to collate and prepare your return for you. It will then show the return to you and ask you to declare that it is correct and confirm that you want to submit it to HMRC. Once you have submitted your return you will receive confirmation through your software that it has been received.
Still paper based records?
If you are still using paper-based records, you should seriously consider changing over to digital accounting now, so your business enjoys a much smoother transition to digital reporting when it is introduced. Trying to swap to digital record keeping and digital reporting at the same time could be an overwhelming task, so make the change gradually by taking that first step now. By not delaying the changeover to digital record keeping, you can also enjoy the many benefits of using online accounting software. These include being able to raise invoices from your smartphone, receive payments faster and manage your accounts wherever you are.
Why is HMRC introducing it?
Making Tax Digital is intended to help you better keep track of how much tax you owe – or how much you are due back – throughout the financial year.
- Accurate Tax Information
Replacing paper-based bookkeeping with digital tax accounts will let you check the information HMRC holds about you is 100% correct.
- Reduced Errors
Making Tax Digital’s new reporting function will allow HMRC will to look at your tax information almost immediately, reducing human error from data input.
- Easier to understand
HMRC anticipates taxpayers will better understand how much tax is owed within the digital tax account – much like online banking.
- Easier contact with HMRC
Making Tax Digital will make it easier for you to contact HMRC online via webchats and secure messages.
Contact us today and receive your free initial consultation.