Making Tax Digital is a government initiative to process tax in a more efficient way, making it a more appropriate process in the 21st century. This new initiative will be taking place in 2019 and will affect both small and large businesses. Many businesses already use software to monitor and manage the data of all things tax, and the government is making this a mandatory procedure across all businesses. And this will probably affect your business.
When Will Making Tax Digital (MTD) take place?
The first stage of the making tax digital timetable comes at April 2019. However, setting up a digital system to track your financials now isn’t a bad idea, especially if you are new to managing your taxes. Adjusting to this process may benefit you prior to the change becoming mandatory.
What will I need for MTD?
As Making Tax Digital is rolling out to make it easier to submit and monitor VAT, HMRC will be expecting to see more data due to the nature of the initiative. Therefore, making tax digital software is necessary to submit your information. Here is a list of suitable software which meets the MTD requirements: Clear Books, Crunch, Quickbooks, Sage Business Cloud and Xero.
At Alexander & Co we are experienced with the MTD Scheme and you may be new to digital accounting. If you don’t feel confident around what you need and you think you may need support from making tax digital accountants, we can guide you through the processes. Feel free to get in touch with us.
Who will it affect?
Under making tax digital HMRC guidance it will affect VAT registered businesses which turnover threshold surpasses £85,000 worth of VAT. Once the first stage has been rolled out, All VAT returns must be filled digitally, as submitting VAT return forms on the HMRC website will be made unavailable.
It will also affect other types of tax, such as income tax for self-employed individuals or corporation tax, although, this won’t be until the earliest of April 2020. While it may not be required for all types of tax currently, it will be beneficial for budgeting as one can begin to use the digital accounting software to determine their tax position at various points through the year.
Why is this happening?
If you are wondering if you can opt out of this initiative, unfortunately, it isn’t an option as this a mandatory process. However, it is worth your while as it offers a multitude of benefits.
First of all, as tax will be monitored systematically it will reduce miscalculations and errors, protection from fraudulent activity and accuracy will be increased.
Secondly, it may seem that this is for the sole benefit of HMRC, but it benefits all parties, including businesses and their accountants. As it is more automated, it will become more efficient to process the data. Finally, after getting around the headache of changing your current procedure for processing taxes and when you are up and running, it will be easier to manage.
For more information surrounding Making Tax Digital and any support you may need please take a look at our Making Tax Digital page.