Making-Tax-Digital-What-you-need-to-know-Sage-Financials

Making Tax Digital: What you need to know | Sage Financials

In Making Tax Digital, Sage Financials, Sage Live by Stephen Stokes

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It feels like 5 minutes ago when the initial plans were released for the Making Tax Digital (MTD) Government initiative. It was actually 4 years ago! With all the changes that are underway, we at itas thought it was time to help prepare you for what is to come. In this blog, we will discuss MTD and in particular, Sage Financials. Hopefully, this will make the transition “a walk in the park”. The movement to digital taxation has been a long time coming and is fast approaching!

Let’s begin with talking through the who’s, what’s, where’s, when’s, why’s and how’s of MTD.

Who does Making Tax Digital affect?

The MTD initiative is only mandatory for those businesses who make above £85,000 worth of taxable income per year. This goes for Businesses, Sole Traders and Limited companies that are registered for VAT. Some businesses below this threshold could still potentially opt in if they choose.

What is Making Tax Digital?

Making Tax Digital is a UK government initiative which has been rolled out to eradicate the current Tax submission methods. To begin with, it is only the VAT submission which will be affected (1st April 2019). Sometime after 2020, the processing of Income and Corporation Tax will also follow the digital route.

Where do I submit my VAT return?

In order to use the new tax submission functionality, businesses will have to upload their data into an MTD compatible system. A list of these can be found here. Businesses will no longer be able to access the usual VAT return section on the HMRC website. Instead, they will have to use the functionality present in their desired accounting software.

Within Sage Financials, when completing a new VAT return, customers will be redirected to the Sage Regulatory Reporting page. From this page you are able to authorise HMRC to view and change your VAT within your accounting system, ready for submission.

When does MTD start?

All businesses that are registered for VAT and are above the threshold will be required to be MTD compliant from the 1st April 2019 (there are exceptions to this, check the HMRC website for full details). Companies will have to keep digital accounting records and file their VAT returns using MTD compliant software from 1st April 2019, in preparation for their first VAT period starting on or after this date.

Why is MTD happening?

The point of MTD is to ensure that all businesses are following a more effective and efficient tax process. By doing so it should alleviate the heavy pressures on tax administration for both the consumer and HMRC. By making tax digital it means that businesses have access to their tax information throughout the year in one convenient location. The move to digital taxation will also ensure that HMRC is receiving more accurate returns, ultimately bridging the gap between the current losses due to VAT return errors.

How do you sign up?

To activate the use of MTD for VAT you will have to register via the HMRC website.

Now that’s out the way, let’s take a look at how MTD is going to work within Sage Financials.

Making Tax Digital with Sage Financials

In order to comply with the new VAT submission methods, Sage have had to adapt their system. Thankfully, the process doesn’t actually differ too much from the existing functionality.

Initially, customers will have to set up a ‘New Submission Type’ feed to allow them to process their VAT digitally. Once this is done, they can then begin their MTD journey for VAT processing.

Previously, once in the Compliance section of Sage Financials, users could generate a ‘New Tax Submission’. This process remains unchanged for MTD compliance.

Sage Financials - Making Tax Digital - New Tax Submission

Hereafter, the new process comes into play…

Once a ‘New Tax Submission’ has been completed, Sage will then redirect you to their Sage Regulatory Reporting page. It is here where you authenticate your device and grant access to HMRC to view your digitally stored data.

Sage Financials - Making Tax Digital - Sage Regulatory Reporting

Running through the process is relatively straight forward, as Sage does all the work for you! All you have to do is simply add in your required date fields and hit ‘Create Tax Return’. Sage Financials will then run through all of your taxable transactions collating the data to submit.

Once Sage Financials has successfully run its process, you will be presented with the ever loved 9 VAT return boxes. This is in the same format as the VAT return section previously used via the HMRC gateway.

Sage Financials - Making Tax Digital - VAT Return 9 Boxes

After you have checked your figures, and are happy to proceed, simply click ‘Submit’.

VAT return… done! (Yes, it’s really as easy as that)

Conclusion

Now, we all know that change is difficult to adapt to, and in most cases, we do so very reluctantly. With Sage Financials already being a cloud-based system, does it not make sense to also complete VAT submissions this way too? Think of how many trees we are going to save, and how much less paperwork there’ll be!

A great benefit of using Sage Financials for MTD for VAT is that you are actually able to process everything through one system. This ultimately saves your business time and energy! Having the ability to keep a track on your VAT between submission periods presents the user with complete visibility… So no unexpected hefty VAT bills!

As you can see, MTD isn’t actually that scary… Especially within Sage Financials! If you do have any questions on Making Tax Digital and Sage Financials, please do get in touch with us. Alternatively, take a look over our list of the ‘Top 10 FAQ’s” for MTD.

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