Making Tax Digital for VAT: Everything you need to Know
Making Tax Digital for VAT
The HMRC’s Making Tax Digital (MTD) for VAT programme will be introduced soon in April 2019 and will bring an underlying change to the manner that businesses submit VAT returns.
To ensure that they are able to fully in accordance with the new rules and to avoid possible fines for filing returns wrongly, it is necessary for organizations to begin preparing now.
The team of tax accountants in London have already divided everything you must know about Making Tax Digital so you can reach up to speed, and just as significantly, ensure you avoid any fines come April next year.
What is Making Tax Digital for VAT?
Making Tax Digital (MTD) is a main element of HMRC’s plan to become a global-leading digital tax authority. The plan is for MTD to be levied on all VAT schemes and registrations, be it retail, annual, flat rate or partial exemption etc.
Those businesses above the VAT Registration threshold, having a taxable turnover, fixed at £85,000 per annum, will have to conform to the new guidelines. While it may not be mandatory, businesses with a turnover below the present threshold may also choose to file their VAT returns through MTD if they agree.
Businesses who come under the MTD spectrum must employ, as per HMRC, “functional compatible software’ to meet out the new essentials. Said software will permit the organization to keep digital business records and files important VAT information electronically.
While there is a wait by many businesses for complete clarity from HMRC on what comes into the category of “functional compatible software” it looks many companies will only have a short window to ensure they are in accordance with the new rules.
One of the most important points of MTD for VAT is that under new regulations, VAT returns will require to involve a much broader range of information than is needed in the current system.
Besides, the new rules bring another provision to the table which will permit businesses to submit additional data to HMRC.
The hypothesis is that enhancing access to data will lead to rise in the returns system, permitting HMRC to process VAT refunds and handle the other queries speedier and more efficiently.
When will businesses need to be Making Tax Digital compliant?
Businesses that come under the guidelines of MTD will be in accordance with the new rules for VAT return periods beginning on or after April 1st, 2019.
For example: if your business is presently submitting VAT returns every calendar quarter, under the new regulations you will need to conform with MTD for the period ending 30 June 2019, and each quarter thereafter.
Business can expect other sections of the tax compliance to follow HMRC norms are planning to unveil MTD across the board, with April 2020 being quoted as a prospective introductory date.
How should businesses prepare for Making Tax Digital now?
In spite of being a little less than a year away, business should begin preparing for MTD now to ensure their amenable operations are formed and any adjustment problems are tackled well forward of the implementation.
The first thing to begin is that the organization is using an online accounting package which will be considered functional for MTD.
Where multiple software programs are used for recording data for VAT purposes such as spreadsheets, the new regulations ask for a digital link set between every piece of software.
As it will be most methodical to switch at the end of an accounting period, firms should prepare for the transformation to a digital accounting system well forward at the end of the year.
The businesses who are currently maintaining their VAT records use an online accounting package, this should be adequate for MTD compliance.
However, for securing peace of mind, it is also significant to speak to a third-party advisor or software provider who can asset compliance way ahead of the deadline i.e. April 2019.
In this manner, they will be maintained up to date with core MTD developments as the April 2019 comes closer, whilst permitting businesses to access the VAT expertise and software, wherever essential, to shift their records onto a digital platform.
Once in place, the administrative work and minimized paperwork related to filing VAT returns digitally should narrow down the pressure and reporting deadlines and minimize the administrative burden.
Other advantages of the programme to business owners involve enhanced access to real-time information, helping out with cash-flow planning, and more efficient tax filing processing and associated queries.
Now you have learned about the procedure of switching to a digital system and looking for specialist support, businesses can ‘future proof’ their accounting software and ensure they are completely in accordance with the rules in good time.