Making Tax Digital
Making Tax Digital (MTD) is the HMRC initiative to get everyone reporting and submitting information to them digitally. The four foundations are:
1. Better use of information
HMRC will use information from third parties, such as employers, banks and other government departments so that individuals will not have to supply information themselves.
2. Tax in real time
HMRC will obtain and process information affecting tax as close to real time as possible, so that individuals and businesses no longer have to wait until after the end of the tax year to know how much tax they have to pay.
3. A single financial account
At the moment most taxpayers cannot see a single picture of their liabilities and entitlements all in one place. By 2020, customers will be able to see a comprehensive picture in their digital account.
4. Interacting digitally with customers
Customers (and agents) will be able to interact with HMRC digitally at a time to suit them. There are already individual digital tax accounts set up with an increasingly personalised picture of tax affairs and this will continue to be developed along with support and advice through webchat and secure messaging. Digital record keeping will link directly with HMRC systems allowing customers to securely send and receive information through their software.
Making Tax Digital for VAT
2019 sees the first roll out of this process with MTD for VAT. The two key requirements for this are:
- To keep tranasction-level records digitally; and
- To use compatible software to submit VAT returns to HMRC.
These requirements will be imposed on businsses that are mandated to be regsitered for VAT and will apply for VAT return periods beginning on or after 1 April 2019. Those who are voluntarily registered for VAT will not yet be affected.
Current estimates are that only 12% of businesses file their VAT returns directly through accounting software. The remaining 88% manually type their VAT figures into VAT Online Services having calculated their VAT figures manually or on a spreadsheet or other software not linked to HMRC.
For most VAT registered businesses this will no longer be possible after April 2019. This means that anyone who does not currently use software that links to HMRC will need to review their current record keeping system and update it to be compliant with MTD before the submission of their first VAT return after 1 April 2019.
How we can help
If your current bookkeeping method does not allow you to submit directly to HMRC through compatible software you need to start preparing.
If you think that you do not have the time to do this yourself, we can offer an all-inclusive service that will take the worry off your shoulders. We will carry out all of your bookkeeping in-house and, once you have approved the figures, submit your VAT to HMRC on your behalf with our fully compatible in-house software.
Alternatively, if you currently have a manual bookkeeping system we can offer bespoke set-up on Xero, fully customised to suit your business and train you in how to use it. Click here for full details
If you currently have a computerised bookkeeping system but are unsure if it is compatible with MTD or you wish to discuss any of the options here, please contact us for assistance.