Making Tax Digital (MTD) has recently launched, affecting around one millions VAT-registered businesses throughout the country. Under this new government initiative, VAT-registered businesses are required to store digital tax records and file their tax returns digitally if they have a taxable turnover above the current threshold of £85,000.
This is the first step in a larger effort to modernise HRMC into a fully digital tax administration in the coming years. In doing so, tax processes will become quicker, easier, and more efficient for businesses and HRMC, although it currently only applies to VAT tax as of 1st April 2019.
Digital asset investing is the best way of business. Even though it may not currently affect you, there are many reasons why you need Making Tax Digital software!
It is a Legal Requirement
Complying with Making Tax Digital is a legal necessity for any VAT-registered business or accountants completing VAT tax for their clients. While there is a six-month period for companies to get caught up with MTD compliance, anyone that misses the tax return deadline or doesn’t use MTD software to file taxes and keep records faces a large fine.
Fines are a based on a point system, with repeat offensives resulting in accumulation of points that eventually result in a massive fine. A penalty issued for every late tax returns, with four points resulting in a fine. Points can be reduced over time by complying with MTD and having a perfect record of filing on set deadlines.
So, if you’re not using Making Tax Digital software despite meeting the current VAT-turnover threshold, you face a significant fine from HRMC.
MTD software offers quite a few benefits for businesses, namely streamlining their tax processes by automating various tasks and making collaboration between departments much easier. For example, all tax data is stored on a single MTD software solution, so it is quicker and easier to access.
A lot of time is saved when making tax returns too, as VAT returns are completed using the software so staff don’t need to manually input as much data. Also, all invoices and records are scanned and uploaded automatically using the software, freeing up resources for other important tasks.
Making an error on tax returns can lead to serious issues and a possible fine, so the fact that MTD software reduces errors is shows how useful it is for businesses. Various processes, such as uploading invoices and inputting data, are automated using MTD software, resulting in fewer human errors and less chance of receiving a fine!
Even if the error doesn’t result in a fine it can lead to all kinds of stress trying to find and resolve the error, so avoid such problems in the future with a robust MTD software solution.
MTD is Just Getting Started
MTD software is only required for VAT tax and businesses meeting the current threshold. However, this will change over time as MTD is incorporated into all types of tax, including self-assessment and corporation tax.
So, while your business may not need to use MTD compliant software right now, it certainly will in the future. This is why it’s good to invest a MTD software solution ahead of the time so that your business is well prepared for when MTD is necessary for all tax processes.