Making Tax Digital
Are you ready?
HM Revenue & Customs (HMRC) plans to become one of the most digitally-advanced tax administrations in the world. This means big changes for our current tax system affecting how data is collected.
HMRC has taken a major step forward in achieving this with the launch of the Making Tax Digital initiative. This will transform tax administration so that it is:
- More effective;
- More efficient; and
- Easier for taxpayers to get their tax right.
For many businesses the starting point for MTD is VAT. In July 2020, it was announced that all VAT-registered businesses must file digitally through Making Tax Digital from April 2022, regardless of turnover.
These businesses will also be required to keep digital records.
What your business needs to do to be ready to sign up for MTD for VAT
You are required to keep digital records. This can be via a spreadsheet, digital cashbook, or bookkeeping software.
Records that you need to keep digitally for MTD for VAT
MTD does not require you to keep additional records for VAT, but to record them digitally.
Your digital records should include, for each supply, the time of supply (tax point), the value of the supply (net excluding VAT) and the rate of VAT charged. They should also include information about your business, including business name and principle business address, as well as your VAT registration number and details of any VAT accounting schemes you use.
One of the main aspects of MTD is that digital records need to be maintained.
What ‘digital record keeping’ actually means
Many businesses already keep digital records, either by spreadsheet or via a software solution. Both of these are still acceptable forms of digital record keeping.
You do not need to keep digital records on just one piece of software. You can use multiple software solutions or use a mix of spreadsheet and software solutions. However, if information is shared between applications, the information must be exchanged digitally. This can be via an API (Application Programming Interface) or via a digital import/bridging link.
As an example, if you use a digital till system within your business, you no longer will be able to simply key in the transactions to your accountancy software. This would need to link automatically or be imported digitally by a csv file.
The advantages of digital record keeping
We consider all businesses benefit from using software to keep digital records which will help you run your business more efficiently and effectively.
We’re Here To Help You
If you would like to discuss the impact of Making Tax Digital for your business, please get in touch on 01228 904 904.