Did you know that from April 1st 2019, all businesses with a taxable turnover above the VAT Registration threshold (£85K turnover) must keep digital records and submit VAT returns using the Making Tax Digital (MTD) compatible software.
This is a Government initiative aimed at simplifying the way businesses report their income, expenditure and taxes. It will ultimately mean the end of tax returns for millions across the UK.
Some businesses relying on paper and submitting a single return once a year leads to mistakes which cost everyone. A small mistake in a financial ledger made at the beginning of the year can mushroom into a serious discrepancy over time, yet it may not be realized until it is time to file a return.
Accountants and businesses spend a lot of time ensuring compliance, which results in lost revenue for the government. HMRC estimates that the Exchequer lost £8 billion a year due to avoidable taxpayer mistakes.
Our current process and the changes made.
We have been reviewing our current processes over the last year to ensure that Optima are compliant and ready for this change. We currently record all our VAT sales and purchase tax on a General Ledger Excel spreadsheet and all sales and purchase transactions are entered into our SAGE 50 accounts software Version 23.
Previously we submitted out VAT information directly to HMRC which is a manual entry of the values in each sales/purchase tax category. This manual entry cannot be submitted via the HMRC online service from April 2019. This is the biggest change and will affect all VAT Registered businesses.
To ensure we are ready we have upgraded our SAGE 50 accounts software to SAGE 50C -Version 25. The latest I-Cloud version of Sage which is compatible with MTD and approved software by HMRC.
This software provides the Application Program Interface (API) Link direct to HMRC to submit our VAT return. This change allows the software to directly link all our VAT information to HMRC without the need for manual entries.
The benefits of Making Tax Digital for businesses include:
- More visibility and less stress
- Less paperwork
- Increased efficiency
- Real time data
We are now fully MTD ready. If you have any question or would like some help and advice, please call the office on 01293 562 700.