yoMaking Tax Digital – VAT
Making Tax Digital for business starts on 1st April 2019 and begins by focusing on VAT.
From that date on, VAT registered businesses (above the £85k threshold) will have to keep digital records and submit VAT returns using compatible software.
What does that mean for your business?
Businesses will no longer be able to keep manual records.
Digital records must be maintained in what’s defined as ‘functional compatible software’.
HMRC define this as software which can connect to HMRC via an Application Programming Interface (API).
This software must also capture more information than is currently being recorded.
This is where Spectrum come in.
Many businesses still rely on old Excel spreadsheets, or manual records.
Making the transition to acceptable software in time will be a challenge, particularly for smaller companies.
Spectrum can provide you with affordable cloud based bookkeeping solutions to suit your individual business needs.
However, we support businesses with QuickBooks, Kashflow, Freeagent and Sage.
Additionally, we can help you make the transition to a Making Tax Digital compliant platform.
What does digital mean?
HMRC expect companies to keep digital records for all transactions.
This means that information must be processed and submitted digitally without any re-keying. That includes manually copying and pasting.
Links between programmes are possible, but they must be digital, not manual.
You won’t be compliant if you continue to store VAT transactions manually.
If you are currently keeping manual books and records, then looking at one of our cloud accounting options needs to be done as soon as possible.
This also applies if you are using a combination of manual and computerised bookkeeping.
This is because you will no longer be able to maintain VAT records in the same fashion.
To ensure your compliance with MTD, you must now store all VAT transactions digitally for six years.
This requirement makes cloud computing the only viable option for most businesses.
Keeping them on a local PC or server won’t guarantee the required life expectancy.
All it takes is a failed hard drive for you to stop being compliant.
April 2019 remained a challenging time frame for many businesses.
Software trials were opened late in the day to qualifying taxpayers.
This is where Spectrum’s flexibility in using cloud-based accounting systems gives you an advantage.
Cloud accounting allows both our clients and our team to access the same set of records. Cloud accounting means that these records are accessible in real time, from anywhere.
Delayed processing times are a result of working with a desktop-based system, cloud accounting software can speed this process up.
As well as this, it will reduce the security of your data. This is because it can be edited by anyone with system access.
Therefore potentially leading to errors creeping in.
Initially, all that you need to submit to HMRC will be VAT return data.
HMRC may request supplementary data later.
What HMRC means by ‘supplementary data’ is yet to be defined. [as of 2019 when article was first published.]
There is a delay up until at least April 2020 for the other aspects of MTD.
This includes income tax and corporation tax.
It’s possible that Brexit occurring at the same time may have an impact on the implementation of Making Tax Digital.
Categorised in: Archived
This post was written by Daisy Vowles