Posted on: 11/12/2018
Making Tax Digital (MTD) has become a hot topic of conversation as we edge ever closer to its April 2019 start date. However, in a recent study, we identified that only one third of the 500 SMEs surveyed have upgraded their software to ensure they are ready for the change.
Although there are only four months to go until the April 2019 deadline, you still have time to make sure your business is ready. Below we have set out some top tips that can help you on your journey to making your tax digital.
There are different implementation dates for different types of businesses. Below we have highlighted the key dates you need to know:
There are many benefits that individuals and businesses can gain from MTD;
There are a few reasons businesses may be exempt from MTD;
To ensure you are ready for MTD, key steps to follow are;
Make sure you record and keep specific VAT information on your business, sales and purchases;
For each sale made:
For each purchase:
Your VAT account should include;
If you are not currently using compatible MTD software or your processes are slightly more complicated, you should consider using bridging software. This allows relevant data to be digitally exchanged from a spreadsheet directly to HMRC.
But, this is not a complete solution;
· You still need to store digital records and a bridging software doesn’t allow this
· You still need to digitally link all accounting applications to complete a digital journey, from the data entered through to the VAT return. Bridging software does not help with this.
Terms such as ‘API’ and ‘digital link’ are frequently used around MTD and so it is important you understand what they mean and why they are important.
A digital link is important because you won’t be allowed to copy and paste information between programmes or within VAT return working papers. So, if you use more than one platform, they will need to have a digital link, which allows the digital and automated transfer of data.
API is used by HMRC to explain how software packages will link to their systems for MTD. It stands for ‘Application Programming Interface’ and describes how software platforms connect to each other and transfer data. It’s important to be aware of because all MTD-compatible software will use HMRC’s API.
There are a variety of providers who offer software on a subscription basis and can tailor the packages to suit your organisation.
When considering the cost, it is good to keep in mind the long-term efficiency advantages of doing so;
There will be a penalty if you fail to fulfil MTD requirements. The system for how penalties will work is currently under review. However, we know it will work on a point-based system where if you receive a certain amount of points, a monetary charge will be incurred.
The earlier you can start to move your business records to a digital platform, the easier it will be to plan and manage come April.
You should also look at the other taxes which will go digital in 2020 and what they will involve (income and corporation). HMRC’s goal is to become one of the most digitally advanced tax administrations in the world.
This means modernisation of the tax system will continue. We can help you through the digitisation tax journey to ensure the transition for you and your business is as smooth as possible, please don’t hesitate to get in touch with firstname.lastname@example.org.
About the author
Richard provides tax advisory solutions and helps business owners, managing and finance directors of entrepreneurial businesses at whatever stage of their business lifecycle (start up, growing, maturing or exiting) to grow shareholder value, improve business performance, minimize business risk and improve control of the business.Go back to Top Ten Tips