I’m sure you have heard of Making Tax Digital somewhere, be it friends or LinkedIn. Hopefully this guide will help you understand exactly what it is and how it will effect you.

What is Making Tax Digital?

Making Tax Digital in an initiative by HMRC aimed to bring the UK tax system into the modern age. MTD will introduce digital filing and record keeping requirements on a regular basis (initially quarterly). The government envision this will make it easier for individuals and businesses to get their tax right and keep on top of their affairs. This will also bring an end to annual tax returns for millions.

When will you be affected?

The first start date is 1 April 2019 and will be compulsory for all entities that are VAT registered in the UK and have an annual taxable turnover exceeding £85,000. So  this will come into play when the start of you VAT quarter is after this date. Companies who’s quarters end May would start 1 June 2019 for example.

How will it work?

MTD will require your business to file their VAT returns via ‘functional compatible software’. See below: https://www.gov.uk/government/publications/software-suppliers-supporting-making-tax-digital-for-vat/software-suppliers-supporting-making-tax-digital-for-vat As you can see Xero is on there, which is the product we is our software of choice. We anticipate that this is the first step in a long-term goal of requiring ‘real time filing’ of individual transactions with HMRC. So there will be more transparency, and more need for getting your books and records into an accounting platform on a regular basis, in an efficient way. MTD introduces new VAT record keeping rules and the requirement that all applicable VAT return data is ‘digitally linked’ so that transactions can be traced from source data (ie purchase/sales ledger) through to VAT return completion and upload to HMRC. While MTD will change the manner in which VAT returns are submitted, it will not alter the deadlines or the frequency of VAT return filings. HMRC says a ‘digital link’ is one where a transfer or exchange of data is made electronically between software programs, without the involvement or need for manual intervention (such as the copying over of information by hand or the manual transposition of data between two or more pieces of software).

Where do I start?

If you do your own books, you should first review your accounting software to see if it is compatible. If your accountant or bookkeeper does this for you, then perhaps you should ask the question to them on how they will deal with MTD. If you are doing your own books manually, then you should look into moving to a software. I would prepare early to avoid the hassle when the deadline creeps upon us.

How can Enso help?

We are happy to give you a free consultation where we can review your finances and MTD for your business. We can make recommendations to increase the efficiency of your finances, and also develop a plan to get you MTD compliant. Our clients at Enso are 100% MTD compliant and we could manage your finances for you to make it as painless as possible when the time comes. Contact us on 07792686479 or adam@meetenso.co.uk for more details.

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