It is a scheme that requires online filing and payment of taxes as well as the keeping of digital records.
The scheme was initially introduced to digitalise VAT submissions (MTDfV) in 2019, but the British Government will be introducing MTD for Income Tax in the future.
It is not just a method of filing your tax return digitally however, you are required to store some of your tax information digitally and if you don’t use accounts software such as Sage Accounts Software for Making Tax Digital, which is HMRC compliant, then you must ensure this software is digitally linked.
HMRC has identified that this initiative will save the government £9billion a year, just by eliminating VAT calculation errors
If you are using accounting software then make sure it is MTD.
You will need to use software that's compatible with the HMRC Making Tax Digital (MTD) programme. This software must allow you to keep digital records relating to your VAT and be able to communicate with HMRC’s computer software so you can file your returns.
Many businesses will be already keeping their accounts records using software. The difference with Making Tax Digital is that the software must be able to keep and maintain the records specified by HMRC, prepare their VAT Returns using the information maintained in these digital records and communicate with HMRC digitally via an Application Programming Interface (API) platform.
If your digital records are up to date, MTD suitable software will be able to collate and prepare your return for you. It will then show the return to you and ask you to declare that it is correct and confirm that you want to submit it to HMRC. Once you have submitted your return you will receive confirmation through your software that it has been received.
HMRC will not be providing any free software for Making Tax Digital reporting for businesses and sole traders, however Sage 50 Accounts software or Sage 50 Business Cloud software will be MTD compliant.
If you would like assistance in upgrading your current Sage 50 Accounts, then contact us for further information.
If you would like more information on how as Sage Consultants we can train your team, install and configure Sage or provide business integration then contact us. You can also email info@realworldbusiness.co.uk or call +44 (0)1909 512182.
