As we head into a new era for taxation in Britain, it’s easy to become confused. Business owners and accountants alike are still trying to get to grips with the newly planned Making Tax Digital (MTD) system. This has become a common part of the tax discussion around the United Kingdom. If you run a business that is paying Value Added Tax (VAT), though, you will need to understand the new MTD system sooner.
MTD is the new digitally driven tax platform that the UK government is putting into place. It’s going to transform how we handle our taxes. In principle, instead of doing one year-end tax return, you will carry out multiple smaller tax returns. This will allow for a quicker implementation of our taxes into the system and is supposed to help minimise risk and waste. However, it is important to note that MTD for VAT is going to need some very specific adjustments on your part.
For example, your presently used taxation software might no longer be enough for you. Many people will find that they simply cannot use the old tax platform that they were used to using, as it is not MTD-compliant. MTD compliancy is all about making sure that the software can connect directly with HMRC and make the transfer of documents easier, simpler and safer.
With MTD still some away from being fully rolled out, though, some people are being quite blasé about what it means for them. If you are in this position, then you could be making quite the mistake. We recommend that you should look closer to getting your VAT returns prepared for MTD compliancy.
What happens if my records are not MTD compliant?
For one, it’s going to make getting your actual taxes put through a whole lot more challenging. The main reason is that HMRC will not allow for non-MTD compliant tax records to be used. Only in the most specific and particular of circumstances is this likely to be allowed, and you would need express permission beforehand.
MTD compliancy, then, is going to become a major talking point for taxation in the years to come. If you are fearful that you might not be fully compliant with what is asked, then you need to find MTD for VAT compliant software.
Thankfully, many options do exist. This should mean that you can make a quick shift from one system to the next. If you do this right, then you could very easily and effectively start dealing with your VAT records. You will find that changing software is going to be very useful, as it will allow for a more modern take on VAT management.
The bottom line, though, is this: if you are required to pay VAT, you need your VAT statements to be MTD compliant. This might mean having to change your accountant or the taxation system that you use to arrange your affairs. Keep that in mind, as MTD for VAT is already in place for many businesses. Be proactive, though, and you can avoid any stress or headaches from a lack of MTD for VAT compliance.