Preparing for Making Tax Digital
Frequently asked questions about MTD
What is Making Tax Digital?
What does MTD mean for my business?
If you are VAT registered then you will need to move to digital record keeping (i.e. use software to record all your VAT invoices and receipts). If you are not VAT registered then digital record keeping is optional for now. If you are VAT registered and do not yet use software to record your VAT information (invoices to customers and from suppliers) you need to start planning for Making Tax Digital. The new implementation date is 1 April 2019. Speak to one of our advisors today about MTD and then we can ensure you are good to go and fully compliant with the new MTD requirements before the deadline.
What will I need to do?
Don’t be put off by this change, take Making Tax Digital as an opportunity. This is your chance to streamline your accounting and business management. Keeping records and filing tax digitally gives you the chance to update your processes, check your income, expenses and profit and potentially make better business decisions as a result. Essentially all you need to do is record your taxable records and submit your VAT returns through MTD-compatible software.
Do I have to do everything digitally?
You must keep certain information – such as VAT-related transactions – in digital form. HMRC’s MTD rules state that all VAT registered businesses must “keep and preserve” their income and outgoings within “functional compatible software”. Therefore you need to start recording and storing your financial records using software or apps and be able to send this financial data to HMRC using HMRC-recognised software or apps (i.e that’s software that can link to HMRC’s API platform).
I have some records in Excel. Can I keep using these?
Essentially yes. It is possible to use software which will allow you to ‘bridge’ programmes like Excel (which are not MTD compatible themselves) with HMRC’s platform. However this can get complicated and using one solution may be easier.
I have some paper records. Can I keep using these?
With some very limited exceptions, each and every transaction must be recorded electronically. Taking totals from paper records and recording those totals electronically does not meet the requirements of MTD. Records would have to be entered entry by entry into software which is likely to be very inefficient whilst using software may be easier.