Currently, the United Kingdom is experiencing its tax generation changes. But do you know how the MTD for VAT regulation changes will impact your business?
A recent survey shows that most small firms don’t know what Making Tax Digital for VAT means. Hopefully, some of the below points will help you understand the changes and what they mean to your company:
1. No More Annual Returns
MTD for VAT regulations seek to improve your tax and business information returns to HMRC more efficient and effective. With these changes, you don’t need to fill the bureaucratic forms anymore.
The changes will affect all the businesses eligible for this system. These are the firms with an annual taxable turnover of $85,000 a year. Companies that earn below this amount are free to enroll to the system on their own volition.
With the introduction of this system, you’ll need to convey your tax returns digitally at least four times a year. But that doesn’t mean that you make four different tax returns every year, no. You’ll need to provide more financial data online.
2. Making Tax Digital Starts on 1st April 2019
Following a successful piloting scheme, the system is set to start operations by April of this year. It will roll out to all businesses that meet the criteria for MTD for the VAT tax.
Any VAT tax registered business with a tax turnover beyond the threshold limit will have to submit this data digitally. It will do so through an MTD compatible software.
As an enterprise, you need to exercise caution when choosing the software to use. Ensure it’s easier to implement, learn and maintain unless you want to give your accountants a hard time.
For corporation and income tax, their details are still on their analysis stage. The taxman says they won’t come under MTD scope until 2020.
Maybe you may have noticed that you already have a digital tax account with HMRC. The statement is essential to MTD, and it’s where you’ll convey data on your business financial position and other tax-relevant data.
3. You’ll Submit Your Business Financial Data Online
As an entrepreneur, you’ll need to inform the HMRC on your business financial position regularly. The updates will be done through a digital account in the form of accounting software.
At the start, you may be able to use spreadsheets to share this data. However, these spreadsheets should be able to connect to your Digital Tax account. Also, remember, they’re different reasons why you should ditch spreadsheets as your data storage area.
4. Regular Tax Updates
Once you set the MTD for the VAT system in your business, you’ll be able to get real-time data on your tax position. But HMRC will collect and process the financial data all year through. The purpose is to minimize any chances of an error or resolving them when they occur.
With this, you won’t need to wait the entire year to know the amount of tax to pay. This allows you to manage your finances better and reduce your debts.