Making Tax Digital (MTD) is an initiative started by HMRC initially for VAT submissions (as of 01/04/2019) & is intended to be rolled out to all areas of taxation for individuals and organisations. The MTD initiative is believed to benefit HMRC on two levels. It will help to ensure the correct VAT is being paid to HMRC, & seeing that VAT accounts for the highest unpaid tax in the UK (35%), the government has estimated that it will generate £610M in 2020-21 from eliminating erroneous returns.
The MTD initiative will also save HMRC money as it will no longer have the cost associated with maintaining the VAT portal where submissions are currently made, estimating a saving of £10M a year of taxpayers’ money.
HMRC’s long-term vision is to have one of the most digitally advanced tax administration systems in the world & they are striving to have MTD applied to all of UK’s taxation processes.
What are my responsibilities?
You will need to ensure that all your transactions (expenses & sales) are individually recorded digitally with a MTD-compliant software. You still need physical &/or electronic copies of these records stored for at least 6 years. The MTD compliant software is then used to calculate & submit your VAT returns.
What should my ‘digital’ data look like?
From April 2019 all digital record keeping will include;
- Business Name
- Business Address
- VAT Registration Number
- VAT Account Schemes
- Information about Supplies & Sales
All Supplies & Sales invoices should include;
- a Tax Point Date
- Sequential (alpha-)numerical labelling format
- Itemisation of services/goods
- NET amount clearly shown
- VAT rate & VAT amount clearly stated
Currently, the date, NET & VAT amount all need to be digitally stored for each-and-every-one of your transactions. It is also recommended that a digital upload of your bank feed is included to back the entries for both expenses & sales. VAT will then be calculated using these digital entries & submitted to HMRC via the compliant software used to record them.
At Taxfile we can see to all your VAT requirements, from the bookkeeping, to the submission via MTD compliant software, only thing left for you to do is to pay your VAT bill to HMRC.