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Your Liverpool accountant can help with Making Tax Digital

Making Tax Digital, or MTD, is an initiative by the government for businesses to store digital financial records and submit updates to HMRC for tax purposes.

Who must make tax digital?

From April 1, 2019 – which incidentally is the first working day after the UK is set to leave the European Union – all businesses that have a taxable turnover above £85,000 are required to store their financial records digitally. This threshold is the same as the VAT threshold, so if your business is registered for VAT it must also be part of the MTD scheme.

There are thousands of businesses that turnover more than £85,000 in Liverpool, so most businesses will need to process tax digitally.

The £85,000 threshold amount could change in the future, and this will usually be announced by the chancellor in the budget.

How does digital tax work?

From April 1, VAT tax must be processed digitally. This is the first stage of the digitisation of tax. Other parts of the tax system, including income tax and corporation tax, will be digitised at a later date.

To work out and pay VAT, businesses must use HMRC-recognised software. There are several major software brands whose financial offerings comply with the specification required by HMRC. If you are already using accounting software, you need to check that it is compatible. If you do not use software for VAT, consult your Liverpool accountant

What are the benefits of digital tax?

Liverpool is a digital-savvy city, with creative hubs springing up in areas like Moorfields and Lark Lane. The aim of MTD is to make the reporting of business finance more in tune with this digital shift, and to be more efficient, with no time-consuming form filling.

Businesses are used to submitting VAT returns every four months. The same process will happen to other tax. Instead of a once-a-year tax return, firms will update their financial information at least four times a year via a digital tax account.

Good accounting software is easy to use and will already be able to submit VAT information, and will be updated in the future to include other tax. The main ability that the software needs is to connect to your HMRC tax account.

In theory, accounts can still be done on spreadsheets, but there will need to be a system to connect the spreadsheet data to the tax system, so modern accounting software is generally an easier and more efficient choice. As the change happens, it could be a good time to ditch the spreadsheet.

Once MTD is fully operational, it will provide almost real-time reports of a business tax position. You no longer will have to wait until the end of the financial year to know about your tax liability.

If you don’t ‘do’ digital, don’t worry – your Liverpool accountant will help you get up and running with a digital accounts package. Once you are familiar with it, you will probably find that using digital financial and tax systems is much easier and takes less time than entering everything in by hand.

MTD is designed to make life easier so that you and your employees can spend more time on running your business, not filling in tax returns.

Posted by Mark
February 28, 2019
Accountants

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