If you have been thinking that making tax digital was only a dream, then you might be surprised to hear that the system is already operational. With a full system implementation date approaching fast, it’s high time you familiarise yourself with it to avoid the last minute rush. Here are the top things you should know about Making Tax Digital Software.
What does making tax digital mean?
MTD is an HMRC initiative that will revolutionize how UK businesses will be handling their tax affairs. Set to be fully operational from the 1st April 2019, making tax digital is designed to make the process of keeping tax records and filing returns more efficient, effective and simplified. The system will start by addressing VAT aspects only while the other form of taxes such as corporation and income tax will be incorporated later in 2020.
MTD for Businesses
Businesses establishments including those that have property income will now have to maintain their accounting documents in digital form. The system will replace paper accounting records, paper records will no longer be recognised by tax laws once the system becomes fully operational. All businesses will now be required to handle all their VAT queries online.
MTD is already operational
Although MTD is expected to become fully functional in April, the pilot phase is already in operation. Some businesses are already using the system. The pilot phase is being used to review the system to check whether there are any glitches. The pilot phase will also help old school businesses owners to become acquainted with the digital systems. If you are not familiar with digital systems, you should consider shopping around for the best accountants who will help you address your online taxation affairs.
Real-time information update
Since all VAT taxation matters will be handled online, your taxation information will be updated in real time as data processing will be happening instantly. This is thanks to cumbersome paperwork being replaced by digital systems. Filing tax VAT will now be easily done regularly thus reducing errors that resulted from too much paperwork. In case of a change in any issue affecting the VAT system, your tax obligations will not be affected allowing you to stay updated on your VAT status. Since business VAT information will be updated regularly, the HMRC will have enough information to test VAT matters such as noncompliance or possible improvements that can help both parties.
According to new VAT guidelines, only businesses with a turnover exceeding £85,000 were required to register for VAT. This threshold will not be affected by the introduction of MTD until the system is fully activated to handle all types of taxations. However, small business owners can start updating their records online since they will be required to maintained records later once all kinds of taxation affairs start being handled online.
Get compatible accounting software
Business will have to ensure that their accounting software is compatible with the HMRC’s taxation system so that you can update your information without trouble. The software will allow you to access and update your accounting information in real time; therefore, you should ensure that it has all the required features.
The introduction of MTD is expected to streamline how businesses handle their taxation affairs by reducing errors and saving time previously used to process information.