What is Making Tax Digital?
An HMRC initiative for the UK tax system and ultimately bring an end to Self – Assessment. MTD is a Tax Revolution in the UK. The MTD’s aim is primarily to make Tax administration, a fully digitalized tax system by 2020. Its primary objective is to make the tax system “Effective, Efficient and Easier”. The Secondary objective is to make MTD as a Cost Cutting measure, and finally to cut down the overheads for HMRC for managing Tax affairs. MTD would bring changes in the tax system which will apply to a wide range of taxpayers, including most businesses, self-employed professionals, and landlords. Here comes the challenge where the businesses would now get their records to be digitized and further it requires a Cloud Integration.
Making Tax Digital timeline:
From April 2019, quarterly reporting is:
From April 2020, quarterly reporting is:
Three Steps to going Digital:
1. Digital Records
2. Digital Link
3. Digital Submission:
Get ready for MTD:
Three Steps for making your Organization ready for MTD
Role of Cloud accounting in MTD:
As MTD is a digital revolution by HMRC, where the tax records are digitized, it comes as a challenge to keep the accounting records digital and can be accessed anywhere and everywhere. So here comes the space for “Cloud Accounting”.
Why Cloud Accounting?
MTD for VAT:
Digital Link – Source Data:
It is widely recognized that a VAT Group return is generally consolidated from several sources of data, MTD is not regulating the internal processes of how this is achieved. The flow of data being processed when arriving at the consolidated return. However should be digital, not withstanding any adjustments.
Software to be used:
HMRC does not approve any software. However it is working with various vendors like DataTracks, Xero, Quickbooks to test various software solutions to send the VAT through their Application Program Interface (API).
Spread Sheets and their place:
Spreadsheets can be used to record data, however, if you have several spreadsheets these must be digitally linked together. There must be no manual transfer or rekey of information from one to another.
They can also be used to create calculations that might be seen in a normal VAT return. These calculations must be kept and referenced to create an audit trail.
Spread Sheets will not be able to file directly into HMRC, so alternative or additional software must be used. All these aspects make it critical that all business entities will be required to move into a software for processing their transactions and filing the returns in a smooth way.
Some of the challenges while recording the transactions in a software:
A good understanding of all these features would enable a Company to maintain their books of accounts in a top-notch condition besides ensuring they get a good overview of their operational performance with timely Management Information System and Dashboards on performance.
To find more about TaurusQuest, visit www.taurusquest.com or send an email to us at firstname.lastname@example.org
The views expressed are that of the author’s and TaurusQuest is not responsible for the contents or the views expressed therein. If any part of this blog is incorrect, inappropriate or violates the IP rights of any person, please alert us at email@example.com. We would take immediate action to correct any violation.