Are you ready for MTD?

You’ve probably heard a lot already about the phrase Making Tax Digital or MTD, but how will this affect your tax return and why do you need to know about it?

From April 2019, any VAT registered business with a taxable turnover above the VAT threshold of £85,000 must submit their VAT returns digitally using compatible software which will link to HMRC systems.

If you fall into this category, this means you need to use HMRC compliant software to submit your VAT returns digitally. Your company must have bookkeeping records in digital form in cloud accounting software such as Xero, which is MTD compatible, to record all of your business transactions and when it comes to submitting your VAT return to HMRC and Companies House, it will be done digitally.

If you’ve been using excel spreadsheets to record information, HMRC has more detail on bridging software which can transfer data to the compatible MTD software. You can find out more here. https://www.tax.service.gov.uk/making-tax-digital-software

So, let’s keep things simple for a moment, the key point to remember is that ultimately the information you have to submit for your VAT return is the same as it has always been, you just need compatible software. 

What information needs to be kept digitally?

You may already be ahead of the game and keeping information digitally, but whatever your situation here’s a checklist from HMRC on the records that will need to be kept digitally under MTD:

• siness name and contact details
• VAT number and details of any schemes used
• VAT on supplies made and received
• adjustments to returns
• time of supply (tax point)
• rate of VAT charged on supplies made
• reverse charge transactions – if your software does not record them, you need to record them twice as a supply made and a supply received
• daily gross takings if you use a retail scheme
• purchases of assets you can reclaim tax on if you use the Flat Rate Scheme
• value of sales made and total output tax on purchases under Gold Accounting Scheme (if applicable)
• documents that cover multiple supplies made or received on behalf of your business by:
  • volunteers for charity fundraising
  • a third-party business
  • employees for business expenses in petty cash

The Government has listed a great step by step guide to help you understand the rules of MTD. As well as providing additional help and support with a range of webinars and videos covering topics such as; how making tax digital for VAT affects your business; compatible accounting software; and making tax digital for income tax. You can find out more from HMRC here.

What next?

Having set up your MTD account with HMRC, you’ll then need to register the software which you have decided to use with HMRC via a link which is provided by your software provider. 

The link will take you back to the HMRC website where you will be asked to approve the software which you are using for your return. You should then receive a message to your submission software confirming approval and give you an authentication token which the software will use on your behalf.

You’re then all set to file your returns via MTD!

What does the future hold for MTD?

With HMRC’s ambitious aim to “become one the most digitally advanced tax administrations in the world,” it makes sense to start thinking about this now even if your company falls below the £85,000 threshold or if you’re self-employed. This is because at some point in the future, MTD will apply to everyone who has to submit a tax return.

How can McKenzies help?

MTD is designed to simplify how you submit your tax system by moving it fully online so as to make it easier for individuals and businesses to get their tax right.

To save you time and stress, if we’re not already filing your tax return for you and Companies House, then why not consider letting us submit it for you?

After all, we already have the software in place and also our team can advise you on ways to make your business more tax efficient and perhaps even save you some money!

For more information on MTD, you may find this link from HMRC useful.

Accountancy Services

Contact our team of accountants in Oxted, Surrey to discuss our compliance, outsourcing and advisory accounting services including annual accounts, partnership tax, employment tax, self-employment tax, bookkeeping and payroll services.