We perceive the most significant change in the UK’s tax system is underway. The transformation will start with Making Tax Digital for VAT from April 2019. Along with this MTD for income tax and MTD for corporation tax are expected to follow in the year 2020. Before moving on to the topic let’s understand MTD in brief.
What is Making Tax Digital?
Making Tax Digital is an HMRC initiative designed to make sure that the UK system is effective, efficient and easier for taxpayers. MTD is going to begin on 1st April 2019 where the business is registered above the threshold of £85k with keeping digital records and submit VAT returns using compatible software. One needs to check the resource hub for updates on the latest development, straight from HMRC.
- Effective: Tax recording will become more comfortable and accurate to provide fewer opportunities for errors, miscalculations and fraudulent activity.
- Efficient: The process used will become automated for business, HMRC and accountant to help them save valuable time.
- Easier: Use the right tool for Making Tax Digital software for small businesses to record and file online tax returns.
MTD Essential Elements
- Business and organization will require maintaining the digital accounting records with meeting the legal requirements in tax legislation.
- Businesses and organizations will require using functional compatible software to submit their returns to HMRC. The current HMRC online tax return will be withdrawn for those within the scope of the MTD rules.
Making Tax Digital for Business is a part of the government’s plans to make it easier for an individual to get tax right with keeping top affairs to link up directly to the HMRC system. Allow customer to send and receive information directly from software to keep digital location lined up. Government statistics show that making tax digital for vat makes the smaller business go digital for managing tax system efficient for users.
Key Objectives of MTD Software
- Making Tax Digital for Business: Move your business online to collect and process data in real time to speed up the process of paying taxes
- Tax Simplified: Get easier and simpler tax data online with centralizing how financial data is used and store in it.
- Making Tax Digital Software for individual taxpayers: Every small to large business are now added to digital tax account by making it easier to submit and pay tax
- Tax in one place: Centralize all the tax information at one place and give a full transparent digital view of your taxes.
Coming generation will eventually not use paper records to maintain proficiency as it will become mandatory for all business and landlord to use accounting records. The day is not that far where the paper accounting will cease to meet the requirement of tax law. It becomes essential for SMEs to meet the need to set out HRMC along the way.
Here we have a list of five tips that make sure you and you’re accounting system is ready
- For all SMEs, it is imperative that your Operating system and accounting software is well set to create and store records in digital format.
- Check accounting software to set up all function over the cloud to know its capacity and update using mobile devices.
- One needs to take care that they have secure internet services which use data over the internet safely and securely.
- Ensure that your system will create a VAT return from the digital record and providing HMRC on a voluntary basis.
- We make sure your software partners will comply with digital tax system by keeping up HMRC development.
We have highlighted a few vital things for making tax digital for businesses which one can be well prepared for upcoming tax changes. There is a big stumbling stock for MTD to move online and take your firm to leap digital way.
Few practices for the digital future of tax
- Move to cloud accounting
- Use a software app to streamline the financial process
- On board your clients to digital and the cloud
- Get paid online and turn transaction
Making Tax Digital is More Opportunity than Burden
There are lots of small businesses that use a professional accountant as a bridge which work between HMRC and themselves. This helps in keeping the record annually and requires lots of work at the end-of-the-year. Flag the information each quarter for tax purpose and relief of the data to have paramount importance.
· Easier Payment
This point initially looks like a burdensome right, but the opportunities are what bring the firms to show their clients with a new system to make it easier for small businesses to pay tax. The improved information and business growth advice will become realistic to plan for tax liabilities. The administrative burden will increase as the owner of the business will need to spend its fiscal affairs. One needs to prepare for the digital tax to take advantage of the good-quality before other firms use the better-equipped information.
· Option to Outsource
It’s incredible outsourcing that comes with great opportunities which Digital tax will bring. It adds extra flexibility for the firm’s growth. For an accountant, it will bring opportunity to look at how your firm operates and from where the efficiencies will come from. Also, many practitioners will provide end-to-end services for clients and will no longer work for MTD. So they need to recognize this firm and use the product to make a valuable move.
· Subscription billing
One needs to look at the real challenge for Making Tax Digital. The process of change can affect all areas of practice with including invoice on a traditional and annual basis with adopting a regular subscription-based model. There is an unparalleled opportunity for accountancy profession to get benefits from the marketing point of view.
Businesses need to be aware that Tax Digital is required to submit updates to HMRC quarterly. The day is not far where paper records will be maintained in the accounting software or an electronic format.