Making Tax Digital
Whether you’re a small business, a large multi-national or a sole trader, the way in which you maintain your records and file your returns is changing.
That’s because HM Revenue and Customs (HMRC) has introduced its new ‘Making Tax Digital’ programme – which will move away from the concept of the annual tax return, and instead require businesses to submit tax information online every quarter.
From 1 April 2019 many businesses need to start preparing for the major changes that the government’s Making Tax Digital project will impose.
Preparation for these changes will take time, additional support, and for some businesses the implementation of new accounting software and processes.
What is Making Tax Digital?
MTD is the HMRC strategy to modernise the current tax system. For businesses it will involve mandatory digital record keeping and quarterly reporting using MTD compliant software.
All UK businesses that are VAT registered and above the £85,000 VAT threshold will be required to keep their records digitally and submit VAT returns to HMRC using MTD-compatible software.
If your business is VAT registered but earnings are below the VAT threshold, you will not be required to keep digital records until the 2020 financial year. You will however need to monitor annual turnover and if this increases above the £85,000, you will be required to comply with MTD.
After April 2020
Income Tax (self-employed, partnerships, trusts and landlords who complete self-assessment tax returns), will not be digitalised until after 2020. Corporation Tax (limited companies): the timings have yet to be confirmed but will not be mandatory before April 2020.
It is also important to note that HMRC has confirmed that charities will not be excused from MTD for VAT.
Making Tax Digital Software
Modern online accounting packages such as Xero, Sage Business Cloud Accounting, QuickBooks Online, Kashflow, Zoho Books and FreeAgent will have software ready for MTD for VAT in time for April 2019 and offer a host of other benefits to assist businesses.
Veracity has a team of specialists who can provide expert advice and support on the best option for your business to ensure MTD compliance, as well as provide training and assistance on how to use new software and maximise the benefits it can offer.
Some of the obvious advantages of using online accounting software are as follows:
- Real-time view of business performance.
- Safe and secure.
- Run your business finances anytime, from anywhere, on any device.
- No installation or IT maintenance required.
- Monthly Subscription Charges and no up-front costs.
- Real-time collaboration with us, your advisers.
- Increased Automation and subsequent time saving processes.
Now is the time to start reviewing existing bookkeeping processes and software to ensure that they will be compliant with MTD regulations.
Veracity can help advise you on the changes that may be necessary to your processes and systems and can advise on the most appropriate software for your business.