26th September 2018
Making Tax Digital for VAT
Filed Under: Accounting, Business News, Tax, VAT
Making Tax Digital (MTD) is probably the biggest change to the tax system in the UK since the introduction of Self-Assessment. Full MTD is being phased in over a number of years, with Making Tax Digital for VAT being introduced April 2019.
With effect from 1 April 2019 all businesses with a taxable turnover above the VAT registration threshold (currently £85,000) will be required to keep digital records and submit VAT returns digitally. This obligation continues even if their taxable turnover subsequently falls below the VAT threshold.
Businesses that are voluntary registered with a turnover below the threshold are not obligated to keep and submit digital records. However, these businesses may wish to comply to MTD if they believe that their turnover will exceed the turnover threshold in the foreseeable future.
It will be a requirement to keep digital records; these can be maintained in more than one program or software product. The use of spreadsheets, either to record individual transactions or as part of a suite of software and spreadsheets is permitted. However, the spreadsheet will need to MTD compatible so that data can be sent to and received from HMRC systems. Where the records are maintained in more than one program or product there must be digital links between each of the pieces of software.
There are many software packages out there that offer MTD compatibility, some more expensive than others and some offering more functionality. Organisations that are already making extensive use of information technology will need to ensure that their software supplier is going to provide MTD compatible versions of the applications that they may use. In these cases the existing and future requirements of an organisation will need to be considered. In recent years we have seen a number of major changes to UK legislation; for example, GDPR, auto-enrolment, open banking and MTD. In many cases it may well be easier and cost effective for an organisation to choose an application that resides, or is at least connected, to the “cloud”. Applications that are hosted on the internet (in the cloud) are able to make connections with other digital services and as a result provide increased functionality and flexibility. Those not currently using software will need to bring their accounts processes up to date. There are many advantages to using modern cloud-based packages which can help increased efficiency and profits given the right support. It is fair to say that the rate of change in technology and business has never been faster. That rate of change will only ever increase. As a result, all organisations will need to consider how they will remain competitive in the future.
How we can help
We appreciate that this is a big issue for our clients and that decisions made now will impact significantly the future. We are therefore offering free drop in workshops to look at the various software packages available and to discuss the criteria that you would need to consider ensuring you make informed judgements in your selection process. Our ‘Getting to Grips with Making Tax Digital’ week commences on 26 November 2018. More details will follow, and you will be able to sign up to workshops at our Autumn Drinks Party on 5 October 2018.
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