MAKING TAX DIGITAL

   MAKING TAX DIGITAL IN THE UK

 

April 2022 is the final phase of Making Tax Digital for VAT and requires VAT registered businesses with taxable turnover above the VAT registration threshold to keep records in digital form and file their VAT Returns using software. This article attempts to provide a detailed guide to MTD, its function, benefits and changes.

WHAT IS MTD?

Making Tax Digital is an integral initiative of the government's Tax administrative strategy. Its main objective is to help to reduce the tax gap by 

This is an initiative to make HMRC as the most technologically advanced tax administration in the world, and complete the finalisation process by the end of year.


MTD LEGISLATION 

Primary legislation of VAT and Income Tax is contained in the Finance (No.2) Act 2017. This provides details about the broad framework of Making Tax Digital.

Secondary legislation for VAT came into force for businesses with a taxable turnover above the VAT threshold from April 2019. From April 2022, revised secondary legislation came into effect, making it compulsory for VAT registered businesses with taxable turnover below the threshold to meet the VAT requirements.


MTD, A BIG CHANGE FOR YOU AND YOUR BUSINESS

Making Tax digital directs the UK individual and business owners to sign up MTD for VAT and keep digital records and file their tax returns using compatible software. It supports HMRC’s plans to digitalise the tax system. This encourages business moving online to improve accuracy and efficiency. 

  • Reducing the scope for error

MTD paves a way to make a compatible solution to keep records and submitting VAT returns on paper to HMRC manually which are prone to errors. It just needs an online software to maintain accounts and update it regularly. The software automatically detects the errors accurately and effortlessly.

  • Trouble-free tax right

MTD makes it easier for a business to get their tax right. This means a customer can manage his tax integration under an online software platform, guiding him throughout his digital taxing process without any intermediary sources.

  • Relaxed tax filing

MTD presents a more integrated approach to business administration and tax, improving certainty and control reducing the time businesses spend on administration in the longer term. It calls for submit tax data every quarter, which reduces the jamming of twelve month data with risk of errors.

  • Numerous function One Software

Use of software that is fully compatible with Making Tax Digital was associated with experiencing benefits. Businesses using fully compatible software report that: benefits outweigh costs, increased confidence in getting tax right, reduction in time spent checking submissions, and benefits that increase over time.

  • HMRC friendly 

MTD aims to benefit business owners and individuals by increasing productivity and financial planning, record and submit the tax data directly to HMRC at a touch of a button. Initially, spreadsheet recorded data is not considered. Later spreadsheets that are integrated to an online accounting software can be allowed to HMRC with digital updates.

This benefits means that one has a better understanding of what you owe and have a record of everything in your hand before the deadlines for tax payment arrives. Thus more focus on business rather than struggling with records of tax.


MAKING TAX DIGITAL TIMELINE

Tax government of UK has published a timeline for Making Tax Digital implementation:

  • APRIL 2016 : MTD consultation launched

  • APRIL 2018: MTD Pilot project launched

  • APRIL 2019: VAT registered Business with turnover £85,000 use MTD software and maintain the record digitally from the start of their next VAT return period.

  • APRIL 2020: Public consultation of corporate tax and increase the scope of MTD to include sole traders and partners with income between £10k and £83k.

  • APRIL 2022:  VAT registered Business with turnover below £85,000 use MTD software and maintain the record digitally from the start of their next VAT return period.

  • APRIL 2023: Taxpayers with business or property income over £10,000 per year use and  abide by the MTD income tax rules from the start of their next account period. 

  • APRIL 2024: Proposed date to commence a voluntary pilot for MTD for corporation tax.

  • APRIL 2025: Unincorporated partnerships with an income above £10,000 to join MTD

  • APRIL 2026: MTD for corporation tax is expected to be mandatory from April 2026


RECORDS NEEDED TO INCLUDE IN THE MTD FOR VAT 

  • Business name

  • Principal business address 

  • Personal VAT registration 

  • Details of VAT schemes 

  • VAT charges

  • Supply Time

  • Supply value

IS MTD COMPULSORY FOR INCOME TAX (ITSA)

MTD creates mandatory digital record keeping requirements on businesses and introduces quarterly reporting requirements. Making Tax Digital for Income Tax self-assessment (ITSA) is the next phase of MTD and this will be compulsory for businesses and landlords with a business income over £10,000 per annum from April 2024. General partnerships will not be required to join MTD for ITSA until the tax year of April 2025, while the date other types of partnerships will be required to join will be confirmed in the future. 


 HMRC have indicated that those who are ‘digitally excluded’ may be exempted from the MTD ITSA rules, in a similar way to MTD for VAT, but we’ve yet to see the final details of how this would work in practice

MTD for ITSA is to keep their records digitally (for ITSA purposes only),provide digital quarterly updates and provide their ITSA return information to HMRC through MTD compatible software.


HOW ZOHO BOOKS HELP YOU WITH MTD?

MTD requires businesses to adapt to new methods and technologies, to digitally account the tax reports. Zoho Books, an online or cloud accounting software,which is ready for MTD complaint accounting software, ease your job, with its easy-to-use interface, can make this transition effortless. Zoho Books  gets you VAT ready, helps you file your VAT returns directly to HMRC, automates business workflows, and helps you work collectively across departments.As your business grows you can use additional extension integration to its other many products of Zoho. Maintain your financial records digitally, reconcile your bank statements, oversee projects, eliminate compliance worries, and more.

Comments

Post a Comment

Popular posts from this blog

THE FUTURE OF ARTIFICIAL INTELLIGENCE

Image
  Blog Digital Revolution: The Future of Artificial Intelligence Ms. Afra Banu A, M.A (English)    Switch to the new normal Everything around us has already changed, starting with our lifestyle to communication and technology got its tremendous form of growth. The Human king is already overthrown by programmed software. Indeed it's time for less labourforce and more programmed intelligence, Artificial Intelligence . Yes, the Digital Revolution is a new normal fact that everyone of us should accept. Artificial Intelligence is molding the future of humankind across all the sectors. Digital Transformation by AI AI has become a widespread piece of modern life.It has conquered all the aspects of day to day dealings from Google Algorithm, chatbox for customer services and even in the name of Alexa from Amazon, a voice assistance, we brought AI into our homes. Among all tech development AI sits at the core of almost every firm. Almost all Tech companies of this world are actively researc
Read more

BEST CRM FOR YOUR BUSINESS- ZOHO CRM

Image
  DOCUMENTARY ZOHO CRM ZOHO CUSTOMER RELATIONSHIP MANAGEMENT Introduction: ZOHO CRM  is a storehouse of all services for your small to large scale business of any kind. It eases you to manage sales, marketing, and customer relations and  support activities and simplify your process, policy, and people of your principles. It is considered to be one of the best softwares in the market with all-inclusive business needs to function efficiently. Features of ZOHO CRM: Every strong building needs a significant foundation. ZOHO CRM provides you with a strong and sound foundation for your business with its vast features . Sales force automation software -  to enhance sales productivity, it supplements the sales reps to rapidly collect the data and information that has been automated by the ZOHO CRM eventually saving time and allows us to focus only on the king customers. Lead management system - to drive more sales, identify the quality of leads and analyze and capture them, convert them into
Read more

DIGITAL MARKETING AND RECESSION

Image
   ARTICLE DIGITAL MARKETING AND RECESSION ___ By MS. AFRA BANU.A , Master of Arts (English) Voice of money : The gloomy and uncertain condition of the world’s economic status is really challenging  to everyone. The high inflation rates, Ukraine war, pandemic, and the rigid monetary policies questions the economic growth of the world. Thus the economy is tightening. This makes a huge difference in all the business strategies, especially Digital Marketing. Marketing in recession? When recession triggers, there comes an idea for customers and business to stop either to buy or to sell. The problem comes when there is shortage in essential goods and services. So the recession winners will be those who act wisely during this period.  All production and service firms are in quite a dilemma in cut-throat expenses for advertising and marketing. It is the case where you not only shield the marketing strategies but also survive recession. Where to invest? What are the best marketing strategies s
Read more