What is MTD?

It is a scheme that requires online filing and payment of taxes as well as the keeping of digital records. Eventually, every individual will be part of the scheme but for now only Making Tax Digital for VAT (MTDfV) which started on 1 April 2019, with other taxes to follow.

It is not just a method of filing your VAT return digitally however, you are required to store some of your VAT information digitally and if you don’t use accounts software such as Sage Accounts Software for Making Tax Digital, which is HMRC compliant, then you must ensure this software is digitally linked.

Why MTD?

HMRC has identified that this initiative will save the government £9 billion a year, just by eliminating VAT calculation errors.

What do I need to do as a new business?

There are a number of checks you should make to ensure you are MTD compliant:

• Check your turnover. If your VATable turnover for the year is above the VAT Threshold of £90,000 then you need to become VAT registered.
• If you are approaching the VAT threshold then you must prepare to submit your VAT Returns digitally.
• If you are using Sage Accounts software then you will be MTD compliant and able to submit your VAT return digitally.
• If you are on an alternative VAT Scheme such as Flat Rate VAT, Retail VAT, or Margin VAT scheme, or Group VAT then you should speak to your accountant about your current processes.

Which Making Tax Digital Software do I need?

You will need to use software thats compatible with the HMRC Making Tax Digital (MTD) programme. This software must allow you to keep digital records relating to your VAT and be able to communicate with HMRC’s computer software so you can file your returns.

Many businesses will be already keeping their accounts records using software. The difference with Making Tax Digital is that the software must be able to keep and maintain the records specified by HMRC, prepare their VAT Returns using the information maintained in these digital records and communicate with HMRC digitally via an Application Programming Interface (API) platform.

If your digital records are up to date, MTD suitable software will be able to collate and prepare your return for you. It will then show the return to you and ask you to declare that it is correct and confirm that you want to submit it to HMRC. Once you have submitted your return you will receive confirmation through your software that it has been received.

If you would like assistance in upgrading your current Sage 50 Accounts Software then contact us for further information.