Help! What Is Making Tax Digital?
Making Tax Digital (MTD) is an UK Government initiative designed to make the UK tax system as effective and efficient as possible. Making tax returns and easier for taxpayers.
This new initiative is coming into play on 1 April 2019 with MTD for VAT. From that date, it is mandatory for businesses over the VAT threshold (£85k) to keep their digital records and submit VAT returns using a compatible software.
Sound simple? It is
However, there are only a few compatible softwares that tax payers are able to use. the HMRC officially list FreeAgent has an award-winnine online accounting software for small business owners, offering a Making Tax Digital Software.
Other components of Making Tax Digital, such as income tax and corporation tax, have been placed on hold until April 2020 at the earliest. Check out our MTD page for frequently asked questions around what making tax digital means for you .
How to prepare for Making Tax Digital 2019
As a tax payer abiding by the new government initiative, you need to decide on two possible routes. Do you need the support of an accountant / bookkeeper? Or are you a small business that can manage their VAT with little support.
What if I want to change my digital tax software?
If you are already signed up to Sage, QuickBooks or another software and aren’t satisfied with their resource. FreeAgent are here to help. Let us help you make the transition to a seamless, efficient accounting software. We’ll move your data across for free and take care of all the messy bits for you.
Am I exempt from making tax digital?
HMRC have said “exemptions from MTD for VAT are the same as those that are already in place for online filing for VAT”. However, if you haven’t checked your exemption status for a while then you should do so now.
What is partial exemption?
You may have seen you are partially exempt, rather than fully.
This means that you can’t reclaim VAT you pay on goods and services that aren’t for business purposes. If your company buys something for both business and personal use, then you’ll need to split the VAT accordingly using your partial exemption method.
Your business buys or sells goods or services that the government classes as VAT exempt.
There are lots of fine lines involved in this type of tax return and can often need more resource and support than expected.
If your company makes both taxable and exempt supplies, it’s your responsibility to keep separate records of your transactions. This is to make sure that you pay the correct amounts of VAT on each.
Any exempt supplies should be recorded as such in your quarterly VAT return alongside your VAT taxable supplies.
What is 0% VAT? What does it mean for my tax returns
There are some products and services that have a VAT-able rate of 0%. If you’re a supplier of zero-rated goods, you should still register for VAT. Any costs incurred by your business can still be reclaimed for VAT. However, if your company is exempt from VAT, because it trades in products and services where VAT is not charged, then it can’t reclaim VAT on costs.
If you are looking for more support and advice on the ‘making tax digital’ initiative contact a relaible MTD software provider and be ready for the change before it gets too late!