Making Tax Digital: What Your Business Needs to Know

As a business owner or an individual who keeps up to date with the latest government news you may have already heard about the plan, Making Tax Digital.

Starting on April 1st 2019, all service businesses will need to hold an electronic record of all business transactions on HMRC approved software to be able to make VAT returns. In effect, this change will improve how the tax system works, making it more efficient, effective and easier for taxpayers to get their taxes right first time.

It is important to know that there will be no changes to the way VAT is calculated, or to deadlines for submitting returns online.

Does this Apply to Me?

Initially, Making Tax Digital will only apply to those with a taxable turnover above the VAT threshold of £85,000 (excluding environmental payments and subsidy).

If you have a taxable turnover that is below £85,000, you may continue to use your current VAT recording process until HMRC updates regulations in the future.

What Is the Purpose of Making Tax Digital?

This procedure is being introduced to ensure businesses and individuals get their tax correct; a financial aspect that if not done right, costs businesses thousands of pounds every year.

Not only will this plan reinforce compliance but will transform how your business operates for the better. It is more efficient to keep online documentation of your tax submissions; for times when you need to go back to a certain date, it is easier to search online rather than sift through piles of paperwork. Also, making your tax digital will bring an end to annual self assessment entries. Your service can make quarterly submissions, meaning there will be less confusion and a greater understanding of your business transactions.

How Does Joblogic Relate?

We promote the digitalisation of businesses, meaning that we encourage our users to go digital with their invoices, quotes, purchase orders and more. Joblogic software integrates with a range of accounts packages including Sage, Quickbooks, and Xero. As a result of this integration, our users feel confident knowing that no data is duplicated, their accounts are fully up to date at all times and data is accurately stored.

Services that use Joblogic are streamlining their whole business processes. Not only does it support them to remain compliant, but contributes to other factors such as workforce productivity, customer relations and internal communication.

For more information about our accounts integration processes and the types of accounts we connect with, view this page.

Round up

Overall, there are three key facts that businesses need to be mindful of:

1. Only one submission will be allowed for each individual VAT registration number. This means companies that keep multiple sets of accounts for different businesses will need to combine them into one figure for a VAT return.
2. Services who use electronic spreadsheets to manage their workflows will also have to invest in specialist accounting software or bridging software (a tool to transfer data from one place to another) as, after the change, they will be the only products capable of sending and receiving data from the website. HMRC provides a useful page allowing you to search or find software for digital VAT record keeping and/or bridging.
3. There will no longer be the option to use a paper-based record-keeping system to calculate the amount of VAT owed before submitting a paper return or manually entering calculations on the HMRC website. However, paper records can still be kept, as long as information from invoices is entered into the electronic system.

Hopefully, you are all caught up on the basics of Making Tax Digital. Check out Sage’s Making Tax Digital checklist to make sure that your business is ready for the tax changes.

Sources:
https://www.gov.uk/government/publications/making-tax-digital/overview-of-making-tax-digital