By now you will have seen or heard ads on radio, online or TV making reference to Making Tax Digital, or its acronym MTD. For GDPR in 2018, read MTD in 2019 and, like GDPR, businesses need not be completely frightened or bewildered by what it means, if they are properly prepared.
Why is Making Tax Digital being introduced by HMRC?
In essence, MTD for VAT is HMRC’s first steps at modernising the UK tax reporting processes. MTD will enhance the quality of data businesses must collate and submit to HMRC with each VAT return. It is a move away from historical vat reporting i.e. sending data in for completed past periods, towards a real time system and more aligned with other international countries. For example, in Portugal, we have seen an amazing Finanças system that forces businesses to report IVA (VAT equivalent) on all sales at the time of sale.
What businesses are affected by Making Tax Digital?
MTD for VAT came into effect on 1st April 2019 and covers all businesses above the VAT revenue threshold of £85,000 pa VAT periods and for periods commencing on or after 1st April 2019. MTD will eventually cover Corporation Tax and Income tax at a date to be formally announced, but not in the 2019-2020 tax year.
Should you be worried about Making Tax Digital?
So, if you are a business that falls into this criteria, should you be worried? Nuvem9’s advice is short – NO! Compliance with MTD for VAT is quite straightforward but beyond that we see MTD as a whole as an opportunity for a business to modernise and gain efficiencies.
For any business not currently accessing cloud accounting systems we can enable them to start collecting accounting records digitally and utilising highly effective online bookkeeping technology. Furthermore, MTD can force a business to totally revamp and modernise outdated systems and processes, and provide education for staff on the wealth of opportunities that exist for eliminating data entry intensive and inefficient bookkeeping processes and instead embrace integration, automation and virtual support services.
What exactly does Making Tax Digital mean?
- Digital records: Under MTD for VAT, VAT records must be kept digitally including date of sale / supply, value of sale / supply and vat rate and amount
- Integrations and links: systems must be deployed to ensure data travels digitally along the reporting processes and avoids the cutting and pasting of data from non-accounting systems such as Ecommerce platforms, ERP or CRM systems
- Submission: returns will now be submitted via the HMRC API – previously you may have logged in and input the summary figures, this option will no longer exist so instead the returns will need to be filed by MTD compatible software.
What should you do if Making Tax Digital affects you?
Nuvem9 is a Xero Certified Partner and Xero is fully MTD compatible. Putting it simply, if you work with us, we will process your VAT via Xero and you will have absolutely nothing to worry about!
In addition, you won’t need to spend huge amounts getting ready for your first return. Nuvem9 is Xero Migration Certified meaning we are trained and certified in taking data from non compatible systems and creating all your data and reporting on Xero. We can also ensure that key business systems are integrated with Xero to maximise the efficiency and automation in your new online bookkeeping processes. (for more information on how Nuvem9 can create Virtual Accounting Departments read here).
If you would like to find out more please contact us today to arrange a free, no obligation video call to discuss in more detail.