If you have been unsure about Making Tax Digital in the UK, you’re not alone. This article explains the key points you should know about the new legislation, and how you can prepare for the deadline. In addition, it tells you how to choose a suitable MTD compliant software. We’ll discuss the importance of MTD and the benefits of MTD-compliant software, and how it will impact your business.
Making Tax Digital for VAT
Making Tax Digital for VAT is a change in the way businesses must file their returns. Businesses must now use a computer program or app to keep all of their records digitally. They must also have software to help them keep track of all their transactions. There are several ways to do this. Businesses can sign up directly or through an agent. In most cases, the change will take place on 1 April 2022. Depending on the size of your business, you may be able to switch to MTD as early as 2018.
Generally speaking, you cannot opt out of Making Tax Digital for VAT. However, you can opt out if you do not wish to use it. Those who are VAT registered will need to incorporate MTD into their accounting process in order to comply with VAT rules. However, some people will be exempt from Making Tax Digital, including disabled and older business owners. There are also exclusions for businesses based in remote areas or those with limited computer skills. If you are concerned that your business is exempt from MTD for VAT, you should contact HMRC to discuss the exemption in more detail.
Information in Digital Form
Another common mistake that many businesses make is that they cannot record their information in digital form. They must instead use spreadsheet software or other applications to keep digital records. Spreadsheets may be incompatible with the requirements of Making Tax Digital, but they can be part of a functional software system. If you are using an electronic accounting system, it is important to remember that HMRC will accept a summary document as a digital invoice. For more information, visit the Making Tax Digital website.
Making Tax Digital for Income Tax
Introducing the new method of keeping records and reporting income and expenses, Making Tax Digital is intended to revamp the whole tax system in the UK. Under the new system, businesses and individuals will be required to use software that is compatible with HMRC’s online tax software system. Failure to do so can result in penalties and interest charges. Even spreadsheets can be used for digital record keeping if they are integrated with an accounting app.
To meet the deadlines and increase the accuracy of record-keeping, the HMRC wants businesses to make digital records of their business transactions. The aim of this initiative is to boost tax receipts and increase record-keeping accuracy. Businesses will have more flexibility as they do not have to manually enter information into multiple systems. Software products will make the process easy for them. The government plans to introduce the new system by April 2020 and have consulted with stakeholders and businesses.
Unlike Previous Tax Systems
MTD eliminates the errors associated with paper tax filing. It gives taxpayers an accurate, continuous view of their tax liabilities, which will allow them to set aside funds for paying taxes. QuickBooks cloud accounting software is compatible with the new system, allowing business owners to focus more time on their business. As part of its Partner Program, FreeAgent is offering exclusive discounts for accountants and bookkeepers.
Self-employed business owners and landlords with income above PS10,000 are required to adopt the new rules for Making Tax Digital for Income taxes. Some businesses have already begun keeping digital records and providing updates to HMRC, and are participating in a live pilot program to test the service. Self-employed business owners and landlords can use software to keep their records digital and to submit Income Tax updates to HMRC. While the transition period will take some time to implement, there are several benefits for businesses and landlords who want to get started.
Making Tax Digital for Corporation Tax
Whether your business is a sole trader or a corporation, you should consider the implications of Making Tax Digital for Corporation taxes. This government initiative aims to improve the quality of information provided to HMRC by requiring businesses to hold accounting records electronically and send all relevant information to HMRC in electronic format. By doing so, making tax returns less likely to be incorrect and reducing the risk of re-keying information are the main benefits of Making Tax Digital. The government expects businesses to transmit information to HMRC electronically at least once per quarter.
Companies must adopt the new system to avoid penalties. However, businesses should understand that going digital can be a difficult process for many companies. It is important to understand that making the switch to a digital system will require companies to make a number of changes to their processes and software. One of the main challenges of MTD for corporation tax is the fact that companies will need to keep records digitally. However, it is not impossible to use spreadsheets to maintain digital records as long as they are integrated with an accounting application.
MTD-Compliant Software
The Making Tax Digital (MTD) initiative will see the introduction of mandatory record keeping and quarterly reporting in digital form. Businesses above the PS85,000 VAT threshold will need to use MTD-compliant software to create and submit their VAT returns. Although the introduction of MTD for corporation tax and income tax has been delayed until 2020, charities are still subject to the rules. MTD-compliant software will allow business owners to comply with the new regulations, including submitting their VAT returns in Sunderland using the right software.
Businesses in the UK must implement Making Tax Digital-compliant software to stay compliant. As of October 2018, the deadline for businesses to begin compiling their accounts online was April 1, 2019. However, only 10% of firms knew the ins and outs of the new digital system. Today, many SMEs have benefited from the introduction of MTD-compliant software and are saving up to PS17,000 per year.
Features of MTD Software
While MTD-compliant software is widely available, the best option for SMEs is to choose a cloud-based solution. This kind of software offers bridging functionality without disrupting an organization’s existing accounting system. Many of the solutions also accept CSV imports from Sage and other bookkeeping packages. In addition, some MTD VAT software includes a feature that allows clients to approve the output file before it is submitted to HMRC.
A2X is a good example of an MTD-compliant software. It collates transactions from Shopify and Amazon and sends them to an accounting platform. It creates a digital audit trail of all transactions. Moreover, it also includes features for reconciling bank statements, making tax returns easier, and more. This software will also allow businesses to avoid compliance worries and make their business easier to manage.
HMRC’s Online VAT Helpdesk
The closing of HMRC’s Online VAT Helpdesk has been criticized by the ICAEW and Tax Faculty. HMRC has said that the decision is a trial and expects to return to normal service by April 2022. However, some people have been left wondering if it’s really the end of the helpdesk. For these people, the closing of the helpline is a serious concern.
The HMRC has a number of contact channels and helplines specifically for directors. Although it can be confusing to follow their rules, there are ways to get help from HMRC without having to spend a lot of time. Here are some of the most effective ways to contact them:
Web Chat
While web chat is not a suitable alternative to telephone calls, it can be useful for those who prefer to communicate with an adviser in a different way. Web chat is a good option if you’re looking for a faster response. However, webchat advisers won’t be able to discuss other tax matters with you. You should keep a record of all your interactions with the HMRC. Make a note of the date, time, and advisor’s name.
When you contact HMRC, they generally provide an email address but don’t provide a phone number. The email system is protected with encryption, and HMRC only writes fragments of information in emails. In some cases, email may also require a disclaimer signed by the sender. If you have a general inquiry, the HMRC Online VAT Helpdesk will help you out. There are a number of other channels to contact HMRC, but the main focus is on online channels.
