Making Tax Digital (MTD) is an initiative created by the HMRC to revolutionise the UK tax system and bring an end to the usual self-assessment. The current tax system is being overhauled to replace the present manual processes with digital ones.
These new policies that HMRC have created are designed to save time, reduce errors and cut the risk of penalties that individuals or companies may incur.
Who is affected?
These changes will apply to a wide range of taxpayers, including 96% of UK businesses, self-employed professionals and landlords.
Who is affected by Making Tax Digital depends on the size and type of business that they operate. As HMRC are doing a gradual rollout of Making Tax Digital, the first businesses that will be affected are ones that are VAT registered and have a taxable turnover above the VAT threshold when MTD begins.
However, you could be exempt from registering for Making Tax Digital if you are already exempt from filing your VAT returns electronically. If this is so, you must inform the HMRC in writing. Then again, you could still choose to take part in Making Tax Digital.
Most businesses will need to follow the new rules at the beginning of the VAT period on 1st April 2019. However, about 3.5% of companies can wait till 1st October 2019 before they need to follow the rules, these businesses may include;
‘Not for profit’ organisations that are not set up as a company
Traders based overseas
Those required to make payment on account
Annual accounting scheme users
How to keep digital Records?
If your business needs to comply with Making Tax Digital, then you will need to; preserve your VAT records in a digital form and file your VAT returns quarterly using a HMRC-recognised software for MTD.
Keeping your records in a digital form doesn’t have to be difficult. Half of the businesses in the UK already use spreadsheets to help manage their finances.
If your business already uses a spreadsheet for recording and preserving your VAT records, then you are part-way there to meeting the Making Tax Digital Standards. However, you will still need to link this to another software to file your returns with HMRC.
This is where Merranti Accounting can come in.
How can we help?
At Merranti Accounting, we are cloud accounting specialists and already have years’ experience using digital software to manage our client’s accounts. Now that the Making Tax Digital processes are in place, we can recommend different types of software that is HMRC-recognised.
Sure, if you already use a spreadsheet to manage, record and store your information, you will be part way there. However, to submit your returns, you need to be linked to a HMRC-recognised software. They have created a list of the software programmes they recognise, which you can find here.
We can provide the services to make your business MTD ready if you authorise us to act on your business’s behalf, and we can also provide you with the appropriate training so that you and your team can understand the software yourselves.
Contact us or book a call using the link to find out how we can help your business become Tax Digital ready.
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