What Is Making Tax Digital?

HMRC introduced MTD to simplify the process of paying taxes. If you are a small business owner, you will be now required to maintain your business records digitally using an MTD compliant software solution from the 1st of April 2019. 

 

When will MTD

Apply to My Business? 

 

If you’re a VAT registered business with taxable turnover above £85,000, you must use an MTD compliant software application to maintain and store your tax records digitally. You are also required to submit your VAT returns in a digital form. This came into force on the 1st of April 2019. 

 

When Will MTD

Apply to My Business? 

If you’re a VAT registered business with taxable turnover above £85,000, you must use an MTD compliant software application to maintain and store your tax records digitally. You are also required to submit your VAT returns in a digital form. This came into force on the 1st of April 2019. 

 

Why is Making Tax

Digital Happening?

 

MTD initiative is set to modernise the way the tax system works, which makes it more effective and more efficient. The government has stated that MTD is being put in place in order to make it easier for self-assessed individuals and businesses to get their tax right. 

 

 

Why is Making Tax

Digital Happening?

MTD initiative is set to modernise the way the tax system works, which makes it more effective and more efficient. The government has stated that MTD is being put in place in order to make it easier for self-assessed individuals and businesses to get their tax right. 

Do I Have to

Register for MTD? 

 

If you are above the VAT threshold then you have to register for VAT, include VAT on all your invoices and submit quarterly returns to HMRC. If you’re not yet using software, then you’ll need to start so your records are saved and stored digitally and your VAT return is filed online to HMRC.

 

Do I Have to

Register for MTD? 

If you are above the VAT threshold then you have to register for VAT, include VAT on all your invoices and submit quarterly returns to HMRC. If you’re not yet using the software, then you’ll need to start so your records are saved and stored digitally and your VAT return is filed online to HMRC. 

Answering Your MTD Questions 

How do I know if my Business is MTD Compliant?

If you are still confused because of the changes in the tax system, you need to get informed about how to make sure you are MTD compliant. If you are following these steps, then you have nothing to worry about. 

   1. Maintain Records Digitally

If MTD applies to your business, you must keep records digitally. Your digital records must be saved and stored in a digital format, and in a way that they can be viewed on a computer or other electronic device. HMRC has specified exactly which information must be saved digitally. Data such as business name, address, VAT number and VAT schemes need to be stored.  Purchase and Sales transaction details such as the date of transaction, the amount, VAT (if any) must all be kept in a digital form. 

    2. Submit VAT Return Digitally

As of April 1, 2019, you are required to submit your quarterly VAT, digitally by using MTD-compliant software. The required VAT return “nine boxes” are to be submitted directly by the application you use even if it does in the using bridging software. The ExpressVAT App is fully MTD for VAT compliant and you do not need other software or even a computer to submit your quarterly VAT! 

   3. Use MTD-Compliant Software

The most important part of becoming completely compliant is obviously to choose an MTD-compatible software solution. The HMRC-recognised software you choose will do the “thinking” for you. MTD compliant software has to not only store your information but do so in a secure way.

What records do I need to keep digitally?

You need to store the following standing data as specified by HMRC:

– Your business name

– Address of your principal place of business

– VAT registration number

– A record of any VAT accounting schemes used

 

For each supply you make to customers (output VAT):

– The date of supply

– The value of the supply

– The rate of VAT charged

For each supply you receive (input VAT):

– The date of supply

– The value of the supply including any exempt or zero rated VAT

– The amount of input tax that you will claim

Your VAT account, including:

– The output tax due on sales

– The output tax due on acquisitions from other EU member states

– The tax payable on behalf of your supplier under a reverse charge procedure

– The tax that needs to be paid following a correction or error adjustment

– The input tax claimable from business purchases

– The input tax allowable on acquisitions from other EU member states

– The tax reclaimable following a correction or error adjustment

– Any other necessary adjustment required by VAT rules.

What will MTD mean to me?

The future for record keeping is definitely digital, and many businesses, large and small, should see benefits from moving to cloud-based accounting systems, including the ability to track sales and costs, automate manual tasks such as invoice, input and bank reconciliations, profitability and adapt their business strategy accordingly. 

As the rollout of MTD is here, you should see the following major changes to the way you manage and report your transactions and taxes:

  • Through your digital account you will be presented with a complete picture of your business’s tax affairs and you will be able to manage all of your tax liabilities at the same time, in the same place.
  • HMRC will collect and process information affecting tax in as close to real time as possible. This should prevent any tax due or repayments owed from building up.
  • You will no longer have to wait until the end of the tax year to know how much tax you have to pay.

How will MTD work if I have other sources of income?

Your personal digital tax account will be populated with other information that HMRC holds such as PAYE details, bank and building society interest, state benefits, etc. There may well be remaining sources of income such as foreign income or capital gains which will require some further notification to HMRC, probably by making adjustments to your digital account by the existing tax return deadline – 31 January following the end of the year of assessment. Where someone has multiple businesses, with different year ends, the MTD filing obligations will effectively be multiplied by the number of businesses, unless your year-ends – and VAT quarters – are adjusted to coincide. 

What are the Making Tax Digital Penalties?

Under MTD, HMRC has confirmed that it plans to apply a points-based penalty system to late submissions and payments because this is comparatively simple to understand and to apply. If, when added up, the number of penalty points is higher than the allowable limit, a financial penalty will be incurred. Businesses will be able to appeal if they get penalty points, but only if they have a reasonable excuse for doing so.

The penalty points will have a shelf life, so they will drop off if there are no more late payments or submission problems. Because businesses are able to see how many points they have incurred already, it’s hoped businesses will change their behaviour to avoid incurring more in future. This new system of penalty points for late VAT returns won’t come into force until 2020.

How Does Making Tax Digital for VAT Affect You?