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Making tax digital

You may have heard about the Government’s plans to change the way we manage our taxes. 

Making Tax Digital is being rolled out gradually by HMRC, starting in April 2019, for businesses with a turnover above the VAT threshold. As part of MTD, businesses will be required to submit their tax details through MTD compatible software. 


  

April 2019 - VAT (Phase 1)


Who’s affected? 


VAT registered businesses with turnover above the VAT threshold (currently £85,000 excluding VAT).


How?


· MTD-compliant software or apps will have to be used to keep a digital record of VAT transactions

· MTD-compliant software or apps will have to be used to submit VAT returns

· Submitting VAT returns using HMRC’s own VAT online services (currently accessed by logging on to HMRC’s site) will no longer be possible


April 2020 - VAT (phase 2)


Who’s affected? 


The remaining VAT registered businesses – those voluntarily VAT registered with VAT-able turnover under £85,000.


How?


· MTD-compliant software or apps will have to be used to keep a digital record of VAT transactions

· MTD-compliant software or apps will have to be used to submit VAT returns

· Submitting VAT returns using HMRC’s own VAT online services (currently accessed by logging on to HMRC’s site) will no longer be possible


April 2020+ - Corporation tax & self-assessment


Who’s affected? 


Sole-traders, partnerships, landlords and trading companies. (The start date will be confirmed by the government following the successful roll out of Making Tax Digital for VAT.)


How?


 It's likely that: 

· MTD-compliant software or apps will have to be used to keep a digital record of financial transactions

· MTD-compliant software or apps will have to be used to submit quarterly updates to HMRC for both income and corporation tax purposes


WHAT’S GOING ON?


Making Tax Digital - or MTD - is the UK's biggest tax shake-up in a generation. If you file a VAT return, you'll soon be required to do it in an MTD-compliant way. That's because HMRC is moving towards a fully digital based tax system. 


MTD is being introduced in stages. Your annual taxable turnover will determine when you need to start taking part. You can find more details in HMRCs VAT notice for MTD on GOV.UK.

From April 2019


Businesses who are VAT registered and have (or have had) a taxable turnover above the VAT threshold (currently £85,000) must keep a digital record of their VAT related finances in MTDcompliant software.

They also have to submit their future VAT returns using MTDcompliant software. They'll no longer be able to log on to HMRC's site to use HMRC's VAT online service to submit VAT returns.


From April 2020 


If the launch of MTD for VAT is successful, HMRC may move to the next phase. This would require the remaining VAT registered businesses - those who are voluntarily registered for VAT - to keep digital records of their VAT transactions and submit their VAT returns using MTD-compliant software.

They too, will no longer be able to log on to HMRC's site to use HMRC's VAT online service to submit VAT returns.


When to comply


If your VAT-able turnover is £85,000 or higher then MTD rules apply from the beginning of your first VAT period starting on or after April 2019.

A VAT period is the inclusive dates covered on your VAT return.

If your VAT-able turnover is less than £85,000 then you do not need to comply just yet.


What does it mean to 'keep a digital record'? 


Your digital records must contain your business name, primary business address, VAT registration number and the VAT scheme you're using.

Your digital records must also show the details of your sales which have had VAT applied. These should include the date of sale, value of the sale (excluding VAT) and the rate of VAT applied.


Will MTD benefit my business?


There are four main benefits of MTD to small businesses:

• Improved quality of record keeping

• Reduced likelihood of error (due to less manual entry)

• More efficient management of business affairs

• Less time gathering and inputting data


If you're already a QuickBooks Online or Xero user the change will be effortless. All the details of your VAT-able income and expenses will already be digitally recorded, categorised and secured in the cloud, ready to be submitted to HMRC when MTD comes into effect.

 

River Bookkeeping and Payroll Ltd can provide guidance and support in moving to an MTD compatible software be it Cloud or Desktop package, or if you prefer we can manage your VAT return on your behalf. The systems that we use are fully compatible with MTD requirements.


Working with River Bookkeeping & Payroll Ltd will give you the peace of mind that you're compliant.



VAT Notice 700/22: Making Tax Digital for VAT

More information can be found on VAT Notice 700/22: Making Tax Digital for VAT. 


Click on the link below to find out more.

HMRC VAT Noitce

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