Members

Making Tax Digital is a bold initiative from the UK government, there's no doubt about that. The ambition of HMRC is to become one of the world's most digitally advanced tax administrations. What are the benefits of making tax digital?

 

Making Tax Digital - what is it?




Make Tax Digital (MTD) is HMRC's initiative to move away from traditionally paper-based tax administration to a digital platform. UK VAT has already been migrated to MTD, which will eventually be used for income tax, company tax, and self-employment tax.

For businesses over the £85,000 VAT threshold, MTD VAT went live in April 2019. Over 1.4 million businesses have joined and submitted their VAT returns through the new digital VAT service since 9th March 2020.

Although MTD will change the way taxes are filed, the tax rules that apply will not change.  

Business owners are required to use records-keeping software and tools that can automatically prepare and submit their tax returns to HMRC as part of MTD. By automating this process, the complex and time-consuming process of entering VAT returns is avoided.  

 

How can digital taxation benefit you?

HMRC's MTD offers several benefits, including:

  • Increasing business productivity - Consumer Digital Index 2019, going digital can save one day per week of administrative work  
  • Resulting in a reduction in paperwork
  • Reduction in stress and anxiety regarding filing tax returns
  • Better accuracy and fewer errors when filing tax returns
  • Increased visibility of tax liabilities (i.e. real-time tax information is available)
  • Ability to redirect staff to other business activities
  • Mobile access to tax data

 

 

What should businesses do to ensure MTD compliance?

The MDT rules for VAT apply only to VAT-registered businesses with a taxable turnover of £85,000 or more. MDT is a voluntary scheme that is available to VAT-registered businesses with a smaller turnover. The quarterly VAT MDT return is filed electronically.

MDT users must have suitable software - a broad range of options is available depending on whether the software is for use by a business or an agent, whether it must track all aspects of VAT, or whether it just needs to interface with existing software and HMRC's MTD system. Costs may be one-time or monthly, or solutions might be free.

VAT-related data must be stored and maintained by businesses according to HMRC requirements:

 

  • Name and details of the business
  • Tax number and any schemes used
  • VAT charged on supplies made and received
  • Return adjustments
  • Tax point (time of supply)
  • The rate of VAT to charge
  • In the case of reverse charge transactions, you need to record them twice as a supply made and a supply received
  • Gross daily takings (DGT) if you are using a retail scheme
  • Assets that you can claim tax back on if using a flat rate scheme
  • Sales and purchase taxes under Gold Accounting Scheme (if applicable)

 

How much does MDT cost for your company?




MDT can result in cost savings due to the reduced time required to prepare manual tax returns. However, on the flip side (as it were), MDT could be costly for businesses. These extra costs may include the costs of compatible software for data storage and transfer.  

Generally, established cloud accounting software charges a monthly fee, depending on how many users are required. Typically, fees range from 30 to 50 pounds per month. The HMRC can also send data that's been entered in a spreadsheet to them for a less expensive option.

 

For more details connect us on:

vat filer mtd
mtd software

Views: 5

Comment

You need to be a member of On Feet Nation to add comments!

Join On Feet Nation

© 2024   Created by PH the vintage.   Powered by

Badges  |  Report an Issue  |  Terms of Service