After April 1 2019, new rules have come into place which requires several businesses to keep records digitally and submit tax returns via compatible software. This depends on the VAT threshold reached, however it is expected to impact a large number of companies in Bath and around the UK. At Roger Hatherall and Company we are on hand to help you in making tax digital, answering any queries you have.
In short, this is a new initiative from the government aimed at shifting accounting into the digital world. This was first mentioned in the 2015 budget and has since then been outlined by the HMRC. The aim is to make our country s tax system easy to use, effective and as efficient as possible.
You can find out more about Making Tax Digital on our website.
HMRC have outlined a brief timetable and this was released in July 2017. They stated that as of April 2019 quarterly reporting would be mandatory for VAT for all VAT-registered businesses with more than 85,000 turnover (the VAT registration threshold). However, quarterly reporting stays optional for those who do not meet this figure.
As of April 2020, quarterly reporting on VAT will be mandatory for income tax and corporate tax for businesses (including landlords) who meet the 85,000 VAT tax threshold. For those underneath the threshold, this will be optional.
Some people have doubted whether MTD will make an impact on mistakes made during the filing of VAT returns as well as record keeping. However, HMRC believes that moving things to a digital platform will help to tackle mistakes. According to a YouGov poll 61% of businesses have lost receipts in the past. With a digital system, it will be easier and simpler in the long term.
Even though HMRC are not able to approve software, they are working with third party vendors to test different solutions. Each system is given a unique reference and this helps to authenticate it for HMRC.
Despite this, it is important that any software being used has been thoroughly tested and that the HMRC link has been correctly authenticated.
On most occasions, an accountant will already be using digital software. This is typically via the HMRC gateway but can be something else.
A digital link is defined as a digital or electronic transfer of data programmes between products, programmes, or applications.
As for a digital record, this is a record which is in a digital or electronic format that can be viewed on a digital device. This could be a computer, mobile, tablet or laptop. Things that count as being a digital or electronic format include entries into an accounting system as well as a digital image or paper record copy.
These records will need to include:
- Value and time of supply
- Details of any VAT accounting schemes used
- Rate of VAT Charged
- Name, VAT number and address of the business
Basically, everyone will be affected by this change. Even though the changes for everyone will not be for all companies straight away, all people will see a change occur.
The same requirements and thresholds apply for partnerships, meaning there are no differences. However, as a partnership you need to include all income for the quarter on top of the property and/or trading income.
When it comes to trustees, individuals and executors only property and/or trading income must be reported on a quarterly basis. A threshold will be set which means that only those over this need to follow the guidelines. To start with, this has been set at 85,000.