|, MTD, Digitalisation|5 things you need to know about Making Tax Digital today

5 things you need to know about Making Tax Digital today

The first phase of Making Tax Digital (MTD) will go live from April 2019. It’s a hot topic in the tax and accounting industry and for good reason. This it will be the most fundamental change to the UK tax system since the introduction of Self-Assessment.

From 1 April 2019, VAT registered businesses with taxable turnover above the VAT registration threshold will be required to transition to MTD, keeping records in digital form and filing their VAT returns using software. HMRC has recently published VAT Notice 700/22 which reveals more about their plans for MTD for VAT.

The regulatory environment is not an easy place to navigate and with the risk of penalties on a business involved, it is all too easy to panic. Fear not. As you approach the go-live date, here are a few things you need to know now, that can help you and your clients prepare for the smoothest possible transition.

VAT registered businesses will be required to maintain digital records

Although many VAT registered clients will already be keeping digital records, some smaller clients may still be keeping manual records. During the tax return season, you or your client are still typing out the figures into HMRC’s online service to submit returns.

Manual records will not meet the requirements of MTD. These clients will need to transition to digital tools to maintain those records. The first step is to identify these clients and make sure they’re moved onto a digital solution that will meet their needs and the regulation alike.

Spreadsheets can stay

For many advisors, spreadsheets are a fundamental part of the VAT return process. The good news is that – so long as they’re used in conjunction with an online solution that can submit data to HMRC digitally – you can continue to use them under MTD for VAT.

Wolters Kluwer has completed extensive research looking into tax processes. This has shown that advisors have invested considerable effort in designing and maintaining complex worksheets, calculations and formulae. Maintaining these spreadsheets beyond April 2019 will make the transition considerably easier.

VAT returns must be submitted via commercial software and not via the HMRC online service

Research shows that 87% of all VAT returns are currently submitted through HMRC’s online service. This facility will be withdrawn as part of the transition to MTD for VAT. After April 2019, businesses that currently use this service will either need to use their own MTD-compliant software to submit VAT returns or ask their advisor to do this on their behalf, again using suitable software.

Supplementary data can be shared with HMRC on a voluntary basis

The calculations that make up the VAT return can be shared digitally with HMRC on a voluntary basis, as part of the submission. These would be used in the event of an inspection, allowing HMRC to perform all necessary checks remotely and complete the inspection without the need to provide further information.

If this is something you’d like to consider doing, by default, as part of the submission process? If so, you’ll need to make it part of your client engagement around Making Tax Digital.

Wolters Kluwer can help you

In April 2018, Wolters Kluwer launched CCH OneClick, built for accountancy practices and their clients, to help enable them to embrace digitalisation. It is a secure, set of cloud tools accessed in one place, so you can connect, communicate and collaborate – anytime, anywhere on any device.

CCH OneClick provides you with an end-to-end MTD solution and a consistent process for MTD, regardless of your client’s bookkeeping package. It’s a single, secure and intuitive environment for client communication.

VAT filing is the next enhancement to the MTD toolset and is due for release in Autumn 2018.

MTD can be an opportunity to truly embrace digitalisation in your practice, unlocking more time for growth and revenue in other areas of your business.

Click here for all things MTD

Recent articles

View by topic

2018-11-21T17:24:16+00:0022 August 2018|Categories: Practices, MTD, Digitalisation|Tags: , , |