fbpx

Making Tax Digital (MTD) has been a long time coming. The initial steps of its implementation are finally set to begin on 1st April 2019. HMRC’s awareness campaign in late 2018 helped taxpayers to at least be aware of its occurrence, however there are many who are still puzzled over what exactly it entails.

Here, we erase any confusion by detailing everything you need to know to ensure you have compliant accounting systems in place.

Roll-out dates

The first stage of MTD will see only VAT needing to be submitted digitally. Whilst there are plans to introduce electronic submission for Income and Corporation Tax, their roll-out dates have not yet been confirmed (but the earliest they would be launched is April 2020).

There are also variances in when taxpayers will be required to file VAT digitally. Some will be exempt entirely – either because they have a justifiable reason (like impracticability) or their business’ turnover is not above the threshold that demands electronic VAT submission (£85,000 in 2019/20). Though there is the option to do so voluntarily if you wish to.

Those who are not excused from the digitalisation of tax may not need to submit their VAT digitally straight away. This will depend on when their next VAT period starts after 1st April 2019. For instance, if your present VAT period commenced on 1st February 2019, the next quarter start date of 1st May 2019 would be the deadline for digitally submitting VAT.

The digital path

If you need to file using the electronic method, then HMRC require that information is communicated to them in a solely digital way. The entire journey must maintain this – otherwise HMRC’s application programming interface (API) will not accept it.

However, HMRC have confirmed that spreadsheets will still be accepted so long as bridging software is employed to transfer the information electronically. These tools, and any other accounting software you utilise, needs to be MTD-compatible and compliant. You can easily check it will work in tandem with HMRC by checking their approved list of suppliers for your chosen one.

For the most part, all data will require digital submission. However, there will be specific information you should keep hold of in its original format – for example, the C79 (import VAT certificate).

Ensuring compliance with MTD software

Those who aren’t compliant with HMRC’s new way of filing tax will be penalised. Whilst there is an initial ‘soft landing period’ for the first year, after this you can expect to receive a fine if you fail to submit electronically. Additionally, there are also penalties for late payments and missing return deadlines – so make sure you know the penalty system.

The easiest way to avoid non-compliance is to employ an approved, MTD-compliant software, such as Liquid. Not only does it fully maintain the digital journey, but it can integrate with the accounting software of your choice too. Liquid’s tools make the process simple for you: you’ll only need to enter data once, and any information from spreadsheets can be passed through.

To discover more about Liquid’s VAT Filer, give our team a call today on 0161 413 5050 or email info@liquidaccounts.com.

Sign up for a free trial today and see how our cloud accounting software can benefit your business.

Try free