Making Tax Digital
MEET OUR Making Tax Digital TEAMMaking Tax Digital (MTD) is a Government initiative designed to transform the UK tax system. Currently, the Government has not widened the scope of Making Tax Digital beyond VAT, and MTD for income tax will not be mandated until 2021 at the earliest.
Making Tax Digital for VAT (MTDfV)
Under the MTD rules, most businesses will be required to keep VAT-relevant data in digital format and to use MTD-compatible software to transfer the required information directly to HMRC.
Who is affected by MTD for VAT?
All VAT registered businesses with a taxable turnover in excess of £85,000 are now obliged to comply with MTD, and will therefore be required to do the following:
- Keep records in a digital format as required by the new regulations
- File their VAT return using MTD compatible software
What constitutes taxable turnover?
VAT taxable turnover is the total value of everything you sell within a 12 month period that is not exempt or outside the scope for VAT purposes.
What is MTD compatible software?
MTD compatible software is an application, that must be able to:
- Record and preserve digital records.
- Provide to HMRC information and returns from data held in those digital records by using the API (Application Processing Interface) platform.
- Receive information from HMRC via the API platform.
How should I prepare for MTD for VAT?
If your business falls within the criteria of MTD and you are not already maintaining your VAT records digitally through a compatible software, we suggest you switch to a cloud based accounting system not only for the purpose of compliance but to gain the following benefits of cloud accounting:
- All in one system increases efficiency compared to using legacy systems with bridging software
- No issues with broken digital links
- Lower cost compared to using desktop based systems
- Financial data is automatically backed up
- Multi-user access makes it easy to collaborate both internally and externally especially with accountants
- Updates are free and instantly available
Contact a member of the team or email: cloud@cbw.co.uk to find out how cloud accounting systems could help you comply with MTD.
MTD Latest updates
March 2020
Digital Links
HMRC has announced that businesses now have until their first VAT return period starting on or after 1 April 2021 to make sure they comply with digital links for MTD.
What is a digital link?
Each piece of software or spreadsheet that contains VAT accounting data must be digitally linked to other pieces of software to create the digital journey. In other words, there should be a clear audit trail from transactional data recorded digitally, all the way through to the VAT return numbers submitted to HMRC.
Once data has been entered into a software or a spreadsheet, any further transfer, recapture or modification of that data must be done using digital links.
For more information on what constitutes a digital link and for examples please refer HMRC VAT Notice 700/22 or click here .
We suggest you use a MTD compatible software directly without having to use bridging software with digital links.
Further information
To contact a member of the MTD team please email mtd@cbw.co.uk or call 020 7309 3800.