You must have heard about Making Tax Digital (MTD) by now, it is doing its round on every business owner. What is MTD? Do I have to do anything for MTD? These are probably some of the questions on your mind. We talk more in detail of Making Tax Digital which is going live in a weeks time for its launch date of 1st April 2019.
MTD is being introduced to modernise the tax system and to have an open communication and provide information to HM Revenue and Customs. This is a mandatory requirement for businesses with a turnover above the VAT threshold of £85,000.
MTD will be active from April 2019 and businesses will be required to keep digital records for VAT purposes. Digitalising tax accounts will let you check that the information HMRC holds about you, is 100% correct. The usual online government account will no longer be adequate, you must have software for Making Tax Digital. Click here to find a list of software’s compatible with MTD.
So why have HMRC introduced this?
HM Revenue and Customs are trying to reduce the amount of VAT inspections, Making Tax Digital will make things clearer for all. HMRC are expecting that taxpayers will better understand how much VAT is owed or how much is to be reclaimed and expecting to reduce human error.
There are approximately 1 million plus businesses in the UK with a turnover in excess of £85,000, and the new transformation should make it more effective, efficient and easier for taxpayers to get their tax right.
If you use spreadsheets to keep business records, you’ll need MTD-compatible software so that you can send HMRC your VAT returns and receive information back from HMRC. MTD does not require you to keep additional records for VAT, but to record them digitally.
Your digital records should include, for each supply, the time of supply (tax point), the value of the supply (net excluding VAT) and the rate of VAT charged. They should also include information about your business, including business name and principle business address, as well as your VAT registration number and details of any VAT accounting schemes you use.
If you are not sure of the next steps to take for Making Tax Digital, we can offer you guidance for your mandatory MTD obligations. We are always here to help!