Making Tax Digital (MTD) has graced our presence for the best part of a year, coming into fruition for most businesses since April 2019. By now the world and his dog should be aware of MTD! However, for those of you who are still wondering what it’s all about, let’s revisit the foundations of Making Tax Digital.
What is Making Tax Digital?
Making Tax Digital (MTD) is a move brought in by HMRC to streamline the UK’s approach to submitting tax data. With the new modernisation in place for tax submission, the government hopes to make things easier for businesses and individuals to keep their tax records up to date. Through the use of digitalisation, businesses should see an improvement to their tax submission, ultimately reducing the risk of human error. Now being digital, organisations should benefit from operating with increased efficiency and effectiveness. By 2021, HMRC aim to have tax submission for VAT, income tax, corporation tax and national insurance fully digitalised. Currently, the government has only rolled out mandatory digital submission for VAT.
Who does Making Tax Digital apply to?
If you are a VAT registered business, sole trader or limited company and have a taxable turnover above the threshold of £85,000, then you should be complying with the MTD initiative. As well as the aforementioned, charities are also included in the effects of MTD. Depending on your type of organisation, you will have a different MTD deadline. If you choose to, you can also opt into MTD compliancy. By making the move you could see an improvement to the accuracy of your accounts and payments to HMRC. From April 2020, the rules will be rolled out to the remaining UK VAT registered businesses.
Will Making Tax Digital benefit my business?
There are many benefits to tax going digital, but there are also many concerns too. A benefit of this change is being able to make better business decisions a lot faster. You will have vital business information to hand, this means you will have the information to spot opportunities and have better quality conversations within your organisation. Usually, we’re completing accounts for a whole year that has already passed, now we’ll understand what’s happening within the year we are working in, due to the additional tax submission deadlines. By working in this manner businesses will benefit as it will allow them to make better decisions, quicker.
A perk to going digital is having easily accessible, up to date data! Having this sort of information at your finger tips will help with your companies future budgeting and cashflow. Businesses should use MTD to their advantage and look to improve their efficiencies and embrace the future. Through keeping real-time data, you will gain a deeper understanding of how your business is performing.
What do I need to do to prepare for Making Tax Digital?
In order to comply with HMRC’s new regulations, businesses have to submit their data via a compliant software. There are many software’s out there which are compatible ranging from mainstream products to bespoke. In today’s blog, we will explore MTD with Sage 50cloud, one of the more premium solutions. If you do not posses the need or requirement to enter onto the software route, you may still be able to fulfil HMRC’s requirements. There is such a thing called ‘bridging software‘. By using something like this you may have the ability to still utilise spreadsheets or your own in-house record-keeping system. This is complete through the use of an API.
How do I enable Making Tax Digital in Sage 50cloud?
If you are already a Sage 50cloud user you may have to enable your software’s MTD. To help you do this I will provide you with a step by step guide below.
First off you need to head to your ‘Company Preferences’. You can do this by heading to Settings > Company Preferences > [Enter Password]. Once you have selected ‘Company Preferences’, a box like the below should appear.
Once within the Company Preferences screen, you will need to navigate to the ‘VAT’ tab.
From here you should be able to see a checkbox called ‘Enable Making Tax Digital for VAT Submissions’. Once the box is checked you will be prompted with a ‘Making Tax Digital for VAT’ box, as shown below.
In order to enable this function select ‘Yes’. You will be taken back to the Company Preferences box where you will need to select ‘OK’.
That’s it done! With that simple change, you are now able to submit MTD compliant VAT returns to HMRC with Sage 50cloud.
Do I need to know anything else for Making Tax Digital?
Thankfully we have wrapped up most of the major points to do with MTD in this short blog. However, if you are looking to find out some more information, feel free to check out our blog on MTD – Frequently asked Questions. With the help of these blogs combined, I am confident you will feel well equipped for your MTD future. If you have any questions or queries, please get in touch.
Stephen is one of our newest members of the itas team, but this hasn’t stopped him already making a fantastic impact on the business. Stephen has over 3 years of experience working within a Finance role and has also completed all of this AAT studies. With Stephen’s knowledge and expertise he really has hit the ground running with itas. Stephen loves to write interesting blogs and endeavours to help all those in need with Sage.
In his spare time, Stephen enjoys keeping fit and maintaining a healthy social life in his home town of Chester. Stephen is always happy to help, so if you need anything, or would like to know more, please get in touch!