Making Tax Digital – Get Ready For Digital Tax
Are You VAT Registered?
If you answered yes then you are part of HMRC’s vision to digitalise the UK tax system. Businesses and landlords will be required to use a digital software to maintain their records and to update HMRC quarterly, starting with VAT. This is all part of the Making Tax Digital (MTD) legislation.
By April 2019, businesses above the VAT Threshold (£85,000) will need to keep digital records and from 2020 this should apply to all other businesses. This includes unincorporated businesses, companies, LLPs, and charities. If your business is VAT registered but falls below the £85,000 threshold but would you would like to opt in and file your VAT information via MTD, you can also do so if you wish.
It is a significant change for many of us and means the end of the annual tax return to be replaced with a digital tax account where all your information will be stored in one place.
This change in the way HMRC wants information from tax payers means that you may need to move from your existing desktop or manual record keeping and onto an online accounting package.
We at TurnerWarran are certified to offer a number of the best online accounting packages that are complaint with HMRC’s guidelines:
- Keep records in a digital form.
- Preserve digital records in a digital form.
- Create a VAT return from the digital records.
- Provide HMRC with VAT data on a voluntary basis.
- Receive information from HMRC via the API (application programme interfaces) platform. This will allow HMRC to send ‘nudges’ to the business/agent.
- Part of HMRC’s list of “software suppliers supporting Making Tax Digital for VAT”
What Else Do We Know So Far…
Amendments – The existing error correction rules will apply under Making Tax Digital.
Monthly and other schemes – you will still be able to submit monthly and non-standard returns under Making Tax Digital. You can also provide information more frequently than quarterly.
Flat rate scheme – you will still be able to use the flat rate scheme under Making Tax Digital. This means digital records of purchase invoices will not be required (unless capital items which cost more than £2,000 including VAT).
Annual accounting scheme – you will continue to send in one annual VAT return.
Retail scheme – you will be able to record gross daily takings rather than individual transactions.
Length of retention of records – VAT records must be kept for six years (or 10 years with VATMOSS). Digital records will need to be maintained for six years following deregistration.
What About Income and Corporation Tax?
Both income and corporation tax returns will eventually have to filed digitally in addition to VAT. This however will not be mandated until April 2020 and we should expect a formal consultation sometime in 2018.
More Information on Making Tax Digital
If you would like to know more about digitally filing your records, check out our Online Software page that explains how online accounting packages such as Sage, QuickBooks and Xero can benefit your business in more ways than one!
Download our “Time To Make The Decision” PDF for more insightful information on switching to online accounting!
You can also contact us via email at or via phone at 01652 650112.