Making Tax Digital (MTD) comes into effect next year, meaning VAT registered businesses whose taxable turnover falls within the VAT threshold need to use compatible MTD for VAT software when submitting their tax returns. It’s the first time that VAT registered businesses must keep digital tax records and submit VAT returns with software.
Around a million businesses around the UK will be affected by these changes, makning it important to understand what options are available for Making Tax Digital for VAT software.
What is Making Tax Digital?
Maxing Tax Digital (MTD) is a new government initiative in the UK that requires all businesses to submit digital tax data. Its purpose is to help streamlining tax return processes for businesses and HRMC and becomes mandatory on 1 April 2019.
MTD applies to any VAT-registered business with a taxable turnover that is above the current MTD threshold of £85,000. Should a business meet this threshold, their VAT tax returns must be processed and submitted digitally, while digital records are also required.
To submit tax returns and maintain digital records, businesses are required to use any compatible MTD for VAT software.
Choosing MTD for VAT Software
Any business that makes a taxable turnover within the current threshold has until April to find a suitable MTD for VAT software supplier. There are over 100 MTD software providers so it should be possible to find a suitable vendor that provides appropriate software for your organisation’s needs.
Not all businesses require the same solutions from their MTD software, so it’s important to think about what you need from the software to ensure you find a suitable supplier.
For instance, if you don’t have much technology in place for your bookkeeping and other financial matters, then MTD software that integrates with spreadsheets is recommended. Known has spreadsheet bridging, this feature allows the software to withdraw spreadsheet content to upload it directly to HRMC when submitting VAT tax.
Furthermore, it’s worth looking ahead when investing in MTD for VAT software. While the initiative is just getting started, it’s part of a wider objective to make HRMC one of the digitally advanced tax administrations in the world.
Therefore, any business looking to use MTD software may want to consider investing in a comprehensive software solution that meets their goals and requirements into the future. This is especially true for accountancy businesses that will use the software on behalf of businesses, with almost every VAT-registered business expected to be integrated into Making Tax Digital over the coming years.
Any business that already utilises a wide range of IT processes may want their MTD software to be compatible with their current systems. Cloud-based software is often the best for integration with other systems, so you may need to think about how current and future IT systems work with MTD and whether they are compatible.