What Making Tax Digital is ...
...and how it will benefit you
From April 2019 you will no longer be able to log onto HMRCs website to type in your VAT figures.
Instead, you must use Making Tax Digital compatible software, such as QuickBooks, to upload your records to HMRC.
If you are one of the 71% affected, you will find the following guide of astonishing value.
The purpose of Making Tax Digital
Quite simply it’s to claw back the £3.5 billion of annually lost revenue that occurs because of mistakes in VAT tax submissions.
It’s also to make tax administration easier and more efficient for you. It will:
... mean you no longer drown in paperwork
… simplify your finances by bringing tax information together in one place
… make managing and submitting your VAT tax returns quicker and easier.
If you’re already using a finance system such as QuickBooks, then becoming Making Tax Digital compliant is relatively simple.
How it will benefit you
Unlike some government initiatives, and with just a little effort, Making Tax Digital will make your life easier.
And it will save you time.
Time better spent on finding work.
On finishing projects.
On building up your business.
Or simply on putting your feet up.
Making Tax Digital simplifies the process of recording information and managing your VAT returns.
As a result, Making Tax Digital …
removes the stress of the last-minute VAT return
reduces costly mistakes
and removes the risk of fines.
It’s able to do this because your financial information will all be online. In one place.
For example, you could create ‘bank feeds’ so transaction data flows straight into your ledger saving you considerable manual labour.
Submitting your finances online keeps everything in one place making it easier to see, simpler to manage and a cinch to submit to HMRC.
You save time, you simplify your finances and you save money.
What’s the point of Making Tax Digital?
As you’d expect, the main reason for Making Tax Digital is to increase tax income.
Hardly surprising, but here’s a little perspective…
over £9bn of revenue is every year because of tax errors and mistakes.
For you, Making Tax Digital reduces the cost and time of managing VAT submissions because it means more accurate information is submitted requiring fewer checks.
It reduces errors because much of the process from your end is simplified and automated.
Submissions also become easier and quicker to understand.
And it should also release HMRCs time to improve engagements with you.
How much will Making Tax Digital cost you?
According to HMRC, “This change means that no business will need to provide information to HMRC under Making Tax Digital for business more regularly than they do now.”
Which is fine, if of course you’re ready.
But in a recent poll by AccountancyAge, only 25% of respondents were confident or very confident that they would be ready by 1st April 2019.
This leaves 75% of you that may not be ready for Making Tax Digital.
The bad news is that by April 2019 you’ll have little choice but to be compliant.
Businesses registered for VAT will be required to keep digital records and submit their VAT return to HMRC through Making Tax Digital compatible software. Or risk costly penalties.
So it's better to be ready sooner rather than later.
As a result of Making Tax Digital you may face a one-off cost and some ongoing costs.
The one-off cost will allow you to use Making Tax Digital compatible software.
But if you’re already using compatible software such as QuickBooks then you’ll avoid this cost.
Ongoing costs may include the subscription fee of using the compatible software, and perhaps the time of a third party to manage this on your behalf.
Entirely for FREE, we'd be happy to have a chat with you about your options.
And as QuickBooks gold partners, we can help you quickly become compliant.
If you'd like to find out more just click the link and we'll be in touch.
When is Making Tax Digital happening?
Making Tax Digital is happening in three phases:
This will impact VAT registered businesses with turnover above the VAT threshold (currently £85,000 excluding VAT).
The remaining VAT registered businesses – those voluntarily VAT registered with VAT-able turnover under £85,000.
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.)
What should you do about Making Tax Digital?
If you’re using paper-based records or spreadsheets to record your finances, you should consider changing over to digital accounting now. Here’s why.
You will enjoy a much smoother transition when Making Tax Digital comes into effect.
It will likely cost you less and become a much smaller headache come April 2019
Trying to swap to digital recording may overwhelm you, so make the change gradually by taking that first step now.
By not delaying the changeover to digital record keeping, you can also enjoy the many benefits of using online accounting software.
These include being able to raise invoices from your smartphone, receive payments faster and manage your accounts wherever you are.
Penalties for failing to comply with Making Tax Digital
MTD penalties will be calculated on tax still owed after 15 days from its original payment date.
If you make a payment, or a Time to Pay (TTP) agreement has been sought between 16 and 30 days after the original due date, half a penalty fine will be charged.
If you fail to pay overdue tax within 30 days of the original due date will be charged a full penalty fine.
In addition to this, a daily penalty will be accrued until payment is made or a TTP agreement has been sought.
This can get needlessly expensive.
Last year, 746,000 people were fined for missing the tax deadline.
It’s best your hard-earned cash stays in your pocket (and not that of the treasury’s) – and we can help you.
We can quickly set you up to be compliant with Making Tax Digital.
There's no hassle
and it won’t cost the shirt on your back.
What’s more, it won’t cost you a penny to find out – just click the link, send us your details and we’ll be back in touch.
How to comply with Making Tax Digital
To comply with Making Tax Digital for VAT you will need to do all of the following by April 1st 2019:
Keep your VAT records digitally
Submit your VAT return to HMRC through MTD compliant software
Sounds simple enough.
But there is a catch …
If you’re submitting your VAT online you may think you’re already compliant, when in fact, you may not be.
Your VAT returns must be submitted through software that has been approved by HMRC as being Making Tax Digital compliant.
As a QuickBooks gold partner, we’d recommend this as your software of choice for its simplicity and cost effectiveness
– but that said, you have been blessed with a choice of 28 others.
It’s worth noting that from the 1st April 2019, the HMRC web page used by businesses to submit VAT returns will be closed to those required to comply with Making Tax Digital.
If you’d like any further advice on which software to choose just click this link, send us your details and we’d be happy to help.
Making Tax Digital software requirements
Making Tax Digital compatible software to:
Capture business transactions
Prepare the VAT return
Send and receive information via API (Application Programming Interface) enabled software, such as Quickbooks
Keep digital records
Send information and returns from data held in the digital records
Receive information from HMRC via the API platform
Needs to connect to HMRCs system
The information you need for Making Tax Digital
You must have a digital record of:
Your business name
The address of your principal place of business
Your VAT registration number
Any VAT accounting schemes that you use
For when you make supplies - each supply you make you must record the:
Time of supply (tax point)
Value of the supply (net value excluding VAT)
Rate of VAT charged
For when you receive supplies - each supply you receive you must record the:
Time of supply (tax point)
Value of the supply
Amount of input tax that you will claim
Your next steps
Making Tax Digital doesn’t necessarily mean more administration, cost and complexity.
In fact, with the right advice and approach, you can achieve the exact opposite.
and we can help you – at a cost that may well plesantly surprise you.
If you’d like more information regarding becoming compliant with Making Tax Digital, or if you’d like support with your bookkeeping and administration - let’s have a chat.
Just click the link and we’ll quickly be in touch.
Have a question about Making Tax Digital, then let's have a chat
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