UK Businesses – MTD for VAT
More and more firms are looking at the advantages of going digital. Millions of companies are already connecting digitally with their banks, clients and vendors. They have been asked to keep digital VAT records and file for returns using Making Tax Digital (MTD)-compatible software.
HMRC’s strategy is to become one of the best tax administrations in going digital and MTD is altering administration of tax at the lowest level so that it becomes better and helps companies to pay their taxes correctly.
The move to digital accounting will remove much of the present systems related to paper records thus reducing errors and giving more time for firms to focus on business operations.
Most companies want to pay their taxes correctly but present statistics reveal that the errors in tax records could be depriving the Revenue department of £8.5 billion annually. This reduction in the loss of tax revenue due to these errors is because of the increased precision that digital accounting gives in addition to the support embedded into the software services. As all details are transmitted straight to HMRC digitally, mistakes in transfer are eliminated.
From 2019, most of the firms with taxable revenue exceeding the VAT limit of £85,000 have been directed to digitalise their VAT records and file returns using software which is in agreement with MTD.
More than 280,000 firms having VAT revenue less than the limit of £85,000 have already signed upon their own and are enjoying the advantages of using MTD.
Also, MTD for Self Assessment of Income tax will be needed for unorganized firms and individuals with total revenue from the firm or assets exceeding £10,000 yearly. The majority of firms will be given time of two years to make and check this MTD scheme on their own before it is finalised.
From Data Tracks, we advise firms and eligible individuals to start changing over to keeping all company details in digital format and to enroll for MTD to file VAT and Income Tax.
Firms and individuals having rental income who enlist for MTD have to keep their operation details in digital format and to transmit tax details to HMRC straight from those data.
The last dates for filing VAT returns and crediting the same are not altered. Firms have to maintain their operation details in digital format. This can be done using specific software for maintaining details or a mixture of software and spreadsheets.
The operation details should also be capable of being transferred digitally between all software employed by the firm for VAT. The details inside the MTD VAT return are developed using information from the digital data. This data is equivalent to the details in the 9 boxes filled while submitting the VAT return.
In the case of spreadsheets, this means that the software must be capable of taking the relevant information from the spreadsheet electronically and sending it to HMRC. Currently, HMRC does not offer its own software but has provided the required Application Programming Interfaces (APIs). Using this, DataTracks has developed a software that enable businesses to keep their records digitally and integrate with HMRC systems.
Using a software can offer a more flexible and tailored range of options, functionality and technical support. This can cater not just to the requirements of the general Industry, but also specific businesses and sectors.
Want more information about DataTracks and our software? We’d love to walk you through! Give us a call or get in touch at firstname.lastname@example.org