Making Tax Digital (MTD) marks a monumental day for businesses in the UK. Under MTD, next year marks the first time that it is mandatory for certain VAT registered businesses to keep a digital records and send VAT returns using software that is MTD compatible.
This is estimated to effect over 1 millions businesses across the UK when the changes come into effect in April 2019. So, now is the time for those effected to get prepared for the upcoming changes to their tax processes.
What is Making Tax Digital?
Making Tax Digital (MTD) is a UK government initiative where businesses must submit tax data digitally. It comes into effect on 1 April 2019 and is designed to streamline tax return processes for both businesses and HRMC
MTD doesn’t apply to all UK businesses however, instead only applying to VAT-registered businesses that have a taxable turnover above the current threshold, which stands at £85,000. Any business that falls into this category must complete their tax returns on compatible MTD software.
Tips for Preparing for Making Tax Digital
While Making Tax Digital will make tax returns easier and more efficient in the long-term, many businesses are still unprepared for these changes. However, preparing for MTD isn’t too difficult and there is still ample time to get ready for the new initiative when it arrives.
There is a lot of information about MTD and its upcoming launch, so take the time to keep yourself informed on the latest news. For example, HRMC has a list of software vendors creating compliant software you’ll need when MTD launches, so make sure to monitor this and other relevant information.
Choose a Compatible Software
As all tax returns and records must be stored digitally under Making Tax Digital, you need to choose compatible software, with over 130 vendors currently working on compatible software products for businesses. You won’t have any other option when MTD arrives, so now is the right time to find a compatible vendor.
It may be worth finding software that offers more than the bare minimum requirements however, as this will likely make the tax return process easier for your business. For example, you’ll want software capable of making digital records from paper receipts, automatic tax calculation, invoicing software.
Know What Records Go Digital
Various types of VAT records must be kept digitally under Making Tax Digital, so knowing what these are gives you enough time to prepare in advance. The following VAT records are required to be digital under MTD:
- Business name
- Business address
- VAT registration number
- Invoices including date/time of service or supply, value of service or supply, and VAT charged for service or supply.
- Records on services/supplies from other businesses