Making Tax Digital
In April 2019 HMRC introduced Making Tax Digital for VAT to the UK tax system. This meant that every vat registered business with a vat turnover above the vat registration threshold must now keep their vat records digitally and submit their vat returns to HMRC using compatible software.
This has meant that it is not possible to prepare the vat returns offline and then enter the amounts in the HMRFC website and submit them. It is now required that the software that prepares the vat return is the one that submits the vat return, or a digital link made between the software that calculates and the one that submits the vat return.
“This has meant that it is not possible to prepare the vat returns offline and then enter the amounts in the HMRFC website and submit them.”
The making tax digital initiative still allows the use of spreadsheets for submitting vat returns if they are then connected to a software by a digital link to enable them to be submitted to HMRC. This type of software is called ‘bridging software’ by HMRC.
You can now store any of the receipts and invoices for your business digitally, so you can scan the receipts and store them in dropbox or google drive. Alternatively, you can use software like Receipt Bank to take a photo of the receipt on your mobile phone and extract all the data from the receipt and send it to your accounting software ready to include in the next vat return.
We think that making tax digital will make the recording of your financial information and submitting the vat returns a lot easier in future if you get the right systems in place. It is enabling the use of modern software technology to take a lot of the repetitive data entry out of keeping records for your accounts.
The move to making digital for vat will be the start of the digitisation of the UK tax system, it will be joined in later years by Self-Assessment and Corporation Tax.