Making Tax Digital is a bold initiative by the UK government. HMRC's ambition is to be the most advanced digital tax administration in the world. What are the benefits to making tax digital?
Making Tax Digital: What is it?
HMRC's initiative, Make Tax Digital (MTD), is to transition away from traditional paper-based tax administration and to embrace a digital platform. MTD already supports UK VAT, which can be used to pay income tax, company taxes, and self-employment tax. bridging software vat
MTD VAT was launched in April 2019 for businesses exceeding the PS85,000 VAT threshold. Since 9 March 2020, more than 1.4 million businesses joined the MTD VAT service and have submitted their VAT returns via it.
MTD will alter the filing of taxes, but the rules for tax will not be changed.
As part of MTD, business owners must use records-keeping software that automatically prepares and submits tax returns to HMRC. This automates the tedious and time-consuming task of entering VAT returns.
How can digital taxation benefit you?
The MTD program at HMRC offers many benefits, including:
- Increasing business productivity – Consumer Digital Index 2019 - Going digital can help you save one day of administrative work per week
- This results in a decrease in paperwork
- Stress and anxiety about filing tax returns can be reduced
- Tax returns can be filed with greater accuracy and less errors.
- Visibility of tax liabilities has increased (i.e. Real-time tax information available
- Redirecting staff to other business activities
- Access to tax data via mobile
What can businesses do to ensure MTD compliance
Only VAT-registered companies with a taxable turnover exceeding PS85,000 are eligible for the MDT rules. MDT is an optional scheme that is open to VAT-registered companies with a lower turnover. Electronic filing of the VAT quarterly return is possible.
MDT users need to have the right software. There are many options available, depending on whether they're looking for software that tracks all aspects of VAT or just interfaces with existing software or HMRC's MTD system. The costs of solutions may be either monthly or one-time.
Businesses must store and maintain VAT-related information in accordance with HMRC requirements.
- Name and details about the business
- Any schemes and tax number
- VAT is charged for supplies received and made.
- Return adjustments
- Time of supply (tax point)
- Rate of VAT charged
- Reverse charge transactions should be recorded twice: as a supply made, and as a receipt.
- If you're using a retail scheme, gross daily takings (DGT).
- You can claim tax on assets that are included in a flat-rate scheme
- If applicable, sales and purchase taxes under the Gold Accounting Scheme
What does MDT cost your company?
MDT can lead to cost savings because it takes less time to prepare tax returns manually. MDT can be expensive for businesses. These additional costs could include the cost of compatible software to store and transfer data. hmrc approved bridging software
Based on the number of users, cloud accounting software generally charges a monthly subscription fee. The monthly fees typically range between 30 and 50 pounds. HMRC can also send data from a spreadsheet to you for a cheaper option.