What is Making Tax Digital?
Making Tax Digital (MTD) is a government initiative designed to help businesses and individuals declare their tax to HMRC digitally. It is a fundamental change to the administration of the UK tax system and will affect how businesses and other organisations; agents and individuals maintain their accounting and tax records and how they transact and communicate with HMRC. This is designed to make the UK tax system effective, efficient, and easier for taxpayers.
Put simply, Making Tax Digital involves using compatible software to manage your tax affairs with HMRC.
What is your business required to do to comply with MTD?
Currently, only VAT-registered businesses with a taxable turnover above the VAT threshold (£85,000) are required to follow Making Tax Digital rules.
However, all VAT registered businesses will be expected to file their returns digitally from 1 April 2022.
After this date, all VAT registered traders will have to utilise MTD compatible software to file VAT returns for VAT periods starting on or after 1 April 2022. Additionally, they are required to keep the VAT records in digital form.
What does ‘compatible software’ mean?
VAT returns for businesses will have to be filed using third-party commercial software; there will be no keying-in of values into HMRC’s online VAT100 form.
Crowthers Chartered Accountants use a comprehensive software package like Kashflow or Xero. These tools use the data from your day to day business activity to build an accurate picture of your business’s tax data in real time, highlighting possible errors and offering prompts for information that might otherwise be overlooked. Once the software has compiled the relevant data, you or your accountant submit it directly to HMRC, via a computer or smartphone.
How can we help?
Crowthers has already moved many clients’ VAT work to digital systems to prepare for MTD with compatible software being utilised to provide cloud-based accounts package solutions.
It is important that you make the move towards a cloud-based accounts package as soon as possible, to help with the transition to MTD by 1 April 2022.
If you require any support, we are happy to help! Please just get in touch with your usual contact or send an email to firstname.lastname@example.org and our team will explain what the continued rollout of Making Tax Digital will mean for you and your business in further detail.