Making Tax Digital is intended to make it easier for individuals and businesses to get their tax right and keep on top of their affairs.
If you were one of the thousands of businesses with £85,000+ turnover and you filed your VAT on HMRC’s Making Tax Digitals platform, you may think it’s over, but this is just the beginning. You will need to be aware of new changes to MTD coming in April 2020.
Bookkeeping for more than just VAT
MTD’s new rules state that these businesses will need to digitally record all supplies received and made, including the time of supply, value and VAT rate. So aside from sales, this extends to purchases, stocks and fixed asset transactions.
Using spreadsheets or multiple software platforms?
Businesses can sometimes use multiple systems to help bring together financial records and prepare their VAT return. However, the transfer of data between these software platforms, such as invoice and accounting systems, must be done using digital links from 1 April 2020.
You will only have until 31 March 2020 to be able to cut and paste from spreadsheets into software as an acceptable way to transfer information.
On 1 April 2020, you will no longer be able to manually input data including manipulating or consolidating data or carry out error corrections in spreadsheets. If you are using more than one application, every piece of data that flows between that software must be exchanged digitally.
If you are you still using spreadsheets for your accounts and bookkeeping, you should consider switching to an online accounting software programme now to avoid being fined.
Penalties will begin
HMRC is ending the ‘soft landing’ period for Making Tax Digital. Therefore, you will be penalised for filing your online returns late.
The penalties are calculated on a cumulative basis, based on the number of offences in the past 12 months. It could be up to 15% of the VAT due. You may also face fines of up to 100% of any undeclared VAT as a result of careless or deliberate inaccuracies in your filings.
Stuck? We can help you
We are Making Tax Digital experts and can help to ensure you are ready for the changes to the way HMRC accept data. We can help ensure that you are compliant with HMRC and MTD and help set you up on cloud accounting, contact us today.