Making tax digital

What is making tax digital?

The government plans to make it easier for individuals and businesses to manage their tax affairs. It is a transformation to the way the tax system works – transforming tax administration so that it is:

• more effective
• more efficient
• easier for taxpayers to get their tax right

This is what HMRC is saying.

VAT-registered businesses with a taxable turnover above the VAT threshold are required to use the Making Tax Digital service to keep records digitally and use software to submit their VAT returns from 1 April 2019.

April 2019 is the key date for Making Tax Digital mandated for all customers (except those that have been deferred).

The government however announced in July 2017 that the pace of rollout would be slowed saying Making Tax Digital will not be compulsory for taxes other than VAT until at least April 2020.

What does this mean for your business

If you are a VAT registered business you have to keep you records using one of the designated  Making Tax Digital Software:

• Xero
• Quickbooks
• Sage Business Cloud

It’s a chance to transform your accounting if you have not already done so. Helping you streamline your accounting and business financial management.

All you (or your accountant) need to do is record your taxable records and submit your VAT returns through MTD-compatible software – like Xero, Quickbooks or Sage Business Cloud.

Making Tax Digital compatible software helps you must keep certain information – such as VAT-related transactions – in digital format, therefore complying with key aspect of the legislature.

HMRC has ruled that the following must be kept digitally in order to comply with Making Tax Digital for VAT:

• Business name and contact details
• VAT number & schemes used
• Adjustments
• VAT on supplies made & received
• Time of supply or receipt
• Net value (excluding VAT)
• Rate of VAT charged or that you will claim back
• Daily Gross Takings (DGT) – retail scheme users only
• Value of sales made under Gold Accounting Scheme (if applicable)
• Total output tax on purchases under Gold Accounting Scheme

***There will be an automatic exemption for businesses, which are registered for VAT but have turnover below the threshold.

A spreadsheet is OK for recording and preserving your VAT records but you will still need a Making Tax Digital software in order to file your return with HMRC.

Contact us at Bookkeepers on Cloud to help your business comply with Making Tax Digital.