Making Tax Digital for business
You may have heard Making Tax Digital mentioned on a variety of platforms which can be confusing.
To ensure you are clear on this important change we have gathered the fact below for your information:
What is it?
Making Tax Digital for business (MTD fb) is a new government initiative.
It has been introduced to ensure that te UK tax system is effective, efficient and easier for taxpayers.
The initiative will begin by focusing on VAT.
Who is it affecting?
All VAT registered UK businesses above the threshold of £85k.
What is the new requirement?
From 1st of April 2019, all affected businesses will have to keep digital records and submit VAT returns using compatible software.
What does it mean for your business?
If your company fall within the defined perimeters above, you will no longer be able to keep manual records.
Digital records must be maintained in ‘functional compatible software’. HMRC define this as, software which can connect to HMRC via an Application Programming Interface (API).
In addition, more information must be captured compared to what is currently being recorded.
What will be the new requirement?
Firstly, as part of the initiative, HMRC will expect liable companies to keep digital records for all transactions.
Therefore, it needs this information to be processed and submitted digitally without the need for any re-keying.
That includes manually copying and pasting.
Links between programmes are possible, but they must be digital, not manual.
In order to stay compliant, all details of VAT transactions must be in a digital format.
You need to look at cloud accounting options as soon as possible if you’re currently keeping manual books and records. Also if you’re using a combination of manual and computerised bookkeeping.
Soon, you will no longer be able to maintain VAT records in the same fashion.
How can Spectrum help you stay compliant?
Companies are now required to preserve VAT transactions for six years in a digital form.
This means that 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.
However, making the transition to acceptable software in time will be a challenge.
So make sure you have a partner who can support you in the process.
Spectrum can provide you with affordable cloud based bookkeeping solutions to suit your individual business needs.
At Spectrum, we work primarily with Xero and Dext.
In addition, we also support businesses with QuickBooks, Kashflow, Freeagent and Sage.
Above all, Spectrum can help you transition to a Making tax Digital compliant platform.
Please contact us to book a free initial consultation and to sign up for a free cloud accounting trial.