HMRC are overhauling the way individuals and businesses will be managing their tax affairs. Making Tax Digital (‘MTD’) is the UK Governments latest initiative to being an administration of taxes into the digital age. MTD is effective from April 2019, where VAT will be leading the way for changes; compliance will be compulsory from 1 April 2019 onwards for VAT registered businesses over the VAT threshold.
This means that Small Business Bookkeeping Osborne Park will be required to maintain their bookkeeping services Calgary digitally and upload their VAT records to HMRC using approved third-party commercial software. It is worth noting that businesses below the VAT threshold are not required to comply with these requirements but can do so if they wish.
It is therefore important for businesses to consider whether their current accounting software has the correct functionality to comply with the requirements of MTD. Under the guidance of HMRC, the software is required to keep and preserve accounting entries in the digital form, and the VAT return should be completed and processed from this data.
The UK Government is aiming to remove the reliance of VAT reporting on spreadsheets as there is the inherent risk of errors in maintaining accounting information on spreadsheets. Hence, the government recommends that spreadsheets are only permitted to the extent that the 3rd party software has APIs (‘Application Programming Interface’) to create a digital link between the Local accountants near me business and HMRC.
The Government plans to bring other taxes into the scope of MTD, but will only do so once they have evidence that the transition of VAT has proven to be successful. The planned date for other taxes such as income tax and corporation tax is at the earliest April 2020.