Making Tax Digital
Here's the current lowdown on Making Tax Digital, being rolled our by HMRC from 5th April 2019.
We've covered a lot of the key information that you need to know below, but if you have any questions, please feel free to get in touch.
What is Making Tax Digital (MTD)?
MTD is an overhaul of the UK VAT system which replaces manual processes with digital ones.
MTD is gradually being rolled out. The first wave affects business who are registered for VAT and have a turnover of £85,000 or over (the VAT registration threshold). This includes all small business including sole traders, limited companies & partnerships.
When does Making Tax Digital Start?
Businesses affected by MTD need to start following the rules from the beginning of their first VAT period starting on or after 1 April 2019.
This includes businesses whose revenue exceeds the VAT threshold during the year, so keep an eye on your turnover. And it’s worth knowing that once you’ve gone over the £85k threshold, you’ll always be required to follow the rules for MTD, unless you deregister from VAT.
What do affected business need to do?
Businesses complying with Making Tax Digital for VAT will need to:
keep and preserve their VAT records in a digital form
file their VAT returns quarterly (or more frequently) using HMRC-recognised software for MTD
HMRC has ruled that the following must be kept digitally in order to comply with Making Tax Digital for VAT:
• Business name and contact details
• VAT number & scheme used
• VAT on supplies made & received
• Time of supply or receipt
• Net value (excluding VAT)
• Rate of VAT charged or that you will claim back
• Daily Gross Takings (DGT) – retail scheme users only
How do I keep digital records?
A spreadsheet is enough for recording and preserving your VAT records, but you’ll still need to link it with other software in order to file your return with HMRC. Your spreadsheet will need to be pretty detailed and will need to include all of the information shown above and be API compatible.
In order to file a return using data contained in a spreadsheet, you’ll need to purchase bridging software from an HMRC approved provider. The cost of such software is currently around £100 - £200 per year.
HMRC have officially recognised a range of software providers supporting Making Tax Digital for VAT. These include online accounting software providers such as QuickBooks, Xero, Sage One and FreeAgent, all of which we are experts in.
Online accounting software:
records your finances digitally
links your business and VAT information to all your transactions
compiles your VAT data from the transactions stored in the software
calculates the VAT you owe, and reminds you when your VAT return is due
supplies your VAT data directly to HMRC with just a few clicks
We’ve partnered with QuickBooks and can offer you MTD software from just £7 plus VAT per month. We’re Advanced Pro Gold Advisors, so can offer you the best advice on how to get started and get the most from your software.
How do I get started with Online Accounting Software?
Moving to online accounting software is pretty easy & we can help you make the move.
To find out more, please drop us line and we’ll happily chat you through your options either over the phone or face to face. Give us a call on 01636 681181 or contact us here.