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Making Tax Digital

Making Tax Digital (MTD) is an HMRC Initiative (introduced in April 2019) aiming to make the tax system more efficient.

It enforces the use of accounting software to submit tax returns to HMRC. MTD is currently only used for VAT submissions. Self Assessments (with income above £10k) are due to join the scheme from April 2023 and other tax submissions will likely  follow.

The Legislation

VAT-registered businesses with a taxable turnover above the VAT threshold (£85,000) are now required to follow the Making Tax Digital rules by keeping digital records and using accounting software to submit their VAT returns.

If you are below the VAT threshold you can voluntarily join the Making Tax Digital service.

VAT-registered businesses with a taxable turnover below £85,000 will be required to follow Making Tax digital rules for their first return starting on or after April 2022.

Self Assessments (with income above £10k) are due to join the scheme from April 2023.

Records you must keep digitally:

Currently MTD registered businesses need to keep the following records digitally:

  • Your business name, address and VAT registration number

  • Any VAT accounting schemes you use

  • The VAT on goods and services you supply, for example everything you sell, lease, transfer or hire out (supplies made)

  • The VAT on goods and services you receive, for example everything you buy, lease, rent or hire (supplies received)

  • Any adjustments you make to a return

  • The ‘time of supply’ and ‘value of supply’ (value excluding VAT) for everything you buy and sell

  • The rate of VAT charged on goods and services you supply

  • Reverse charge transactions - where you record the VAT on both the sale price and the purchase price of goods and services you buy

  • Your total daily gross takings if you use a retail scheme

  • Items you can reclaim VAT on if you use the Flat Rate Scheme

  • Your total sales, and the VAT on those sales, if you trade in gold and use the Gold Accounting Scheme

 

You also need to keep digital copies of documents that cover multiple transactions made on behalf of your business by:

  • Volunteers for charity fundraising

  • A third party business

  • Expenses for employees in petty cash

How can we help?

  • Signing you up to Making Tax Digital 

  • Help with selection of accounting software or using one of the software packages we use

  • System & process set-up

  • Recording of sales & purchase information

  • Processing & submitting VAT returns

  • VAT & MTD legislations