Making Tax Digital for Business
As of April 2019, all businesses with a turnover above £85K will have to submit VAT returns through the HMRC gateway using accounting software. Businesses will have to change the way they process tax. Let’s quickly understand what MTD is and how it might affect?
What is MTD (Making Tax Digital)?
MTD is the UK government’s pioneering initiative to take all tax submission online and to therefore enforce digital record keeping via computer software. VAT registered businesses are the first to take part as of April 2019, with other forms of business tax following in 2010 and beyond.
Things to know before making tax digital for your own business
Businesses need to understand what is happening in the market and what do you need to know before MTD
No More annual tax returns: VAT returns must be submitted to HMRC via using API platform and not by manually entering VAT figures on HMRC portal. So make sure you generate a report of your business to get more efficient results.
Making tax digital has already started: MTD expect that you’ll get to hear that HMRC is making constant amends and we will hear more announcements about practicalities of the scheme in due course. You might have noticed that you are now able to access your digital tax account with HMRC and gain access to all your tax information.
Submit your business figure before using software: The VAT return figures should be transferred digitally instead of manually adding into the HRMC portal. There should be soft landing in MTD which allow more time for adding digital links to transfer data between software packages.
Tax updates happen in real-time: It’s said that once the MTD for income tax and corporation is running for sole traders, it will be providing the best business tax position with using digital tax systems. This will help in preventing human error. Also this will allow you not to wait too long and find out how much tax you owe.
Common MTD Questions:
1. What data I have to submit when filing VAT returns?
The Good news is, HMRC will not require more data which is disclosed in your current VAT Returns. No need to supply underlying data linked with a return or HMRC backward access data. You need the total disclosed on face VAT return MTD spreadsheets.
2. How will your software need to works to be MTD Complaint?
• It should keep records in Digital Form
• Preserve Digital Record with ease
• It should create a VAT return using underlying digital records
• Provide HMRC with VAT data on a voluntary basis
• Receive information from HMRC via the API portal
3. How will I know if my current software supplier is MTD Complaint?
• Are they working with HRMC?
• What MTD functionality they are planning to deliver?
4. To start the MTD Process, should you register your clients with HRMC?
• Yes, you should register to subscribe to an agent for MTD Purpose
• File quarterly updates on behalf of the clients.
5. What happens if your client has a limited broadband connection?
• There will be no broadband coverage or poor connection
• The legislation is silent over what constitutes old age
6. What information should be included in 5th return?
As of now, the business turnover is below £85,000 p.a so at the end of the year return will need to be submitted on three line account basis.
For more information please contact us and get a free advice to SMEs in various locations across the UK.
Embark on transformational change and improve your current process by making compliance more efficient process.