Here's all you need to know about making tax digital

Here’s All you Need to Know About Making Tax Digital Signup (MTD)

22/12/2020Making Tax Digital , Tax Issues , VAT

You’re looking forward to finding out more about the abbreviation MTD. So basically, what is MTD? MTD stands for making tax digital. This blog further guides you about all you need to know about making tax digital signup, and debunks common myths HMRC has eased up the manual accounting and VAT process and made everything digital. The system has been in place since 1st April 2019.  Since that date, HMRC has made sure all the digital records are kept digitally. There are no laws enforcing the system. Still, a lot of businesses have manual records too.

 

So what’s the hype about Making VAT Digital? How does it work out? Making VAT digital requires VAT registered businesses to use compatible software to sort out transactions and report HMRC VAT.

  • MVD commences for the first VAT accounting period commencing after 1st April 2019.
  • It applies to VAT-registered business with a turnover above the VAT threshold (currently £85,000)
  • Certain businesses are deemed as complex for VAT, their MVD start date is deferred and commences on the first VAT accounting periods on or after 1 October 2019. Your business might end up getting labelled as complex by HMRC.

 

What are the common myths about Making Tax Digital Signup(MTD)?

  • Most people are inferring that MTD won’t reduce errors. Most of the people end up losing their receipts, and when their accountants have to file their taxes, they don’t have any. MTD might end up reducing the errors as no manual transportation of data is involved.
  • It’s also a common misperception that once a business is part of the Making Tax Digital Campaign, they can’t use spreadsheets. There are no restrictions to use spreadsheets. Business can use them for record-keeping and calculations. There are plenty of bridging software available, which help out businesses transport the data to HMRC. So that’s what works out in this case.
  • It’s also a common misperception that HMRC doesn’t encourage small businesses to use the tools. That’s also not true. According to HMRC, there are already 11 products completely free to use. You’ve just got to take care of the conditions.
  • What if you get wrong with the entire process? It’s a common misperception that HMRC may penalize you for it. That’s also not true. HMRC completely understands that when a business is adopting a new idea, it might take some time for the staff to understand it. As of now, HMRC is taking all the errors lightly.

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