Making Tax Digital Service Launches on 1st April for all VAT registered UK Businesses
Making Tax Digital is a key part of the government’s plans to make it easier for individuals and businesses to get their tax right and keep on top of their affairs. From 1st April, this new service will require most VAT registered businesses to use software to keep records of their accounts digitally and to submit their VAT returns. The main thinking behind this service is to transform tax administration across the entire UK, making it more effective, efficient and easier for taxpayers to get their tax right first time around.
The accuracy of the submissions from companies will come from the use of specialist software. HMRC understands the majority of customers want to get their tax right but the reality is there is a tax gap between what should be received and what is actually paid. If every penny was collected, HMRC would be a massive £33 billion better off, which equates to 5.7% in lost revenues. Making Tax Digital (MTD) is making fundamental changes to the way the tax system works in this country, aiming to be global pioneers in tax administration and ensuring they collect all the monies owed to them.
So, what does MTD practically mean to UK VAT-registered businesses? Don’t most businesses use a form of technology and software to manage their accounts?
Under this new legislation businesses will be required to use software that is capable of keeping and maintaining records specified in the regulations, preparing their VAT returns using the information maintained in those digital records and communicating directly with HMRC digitally via their specified API Platform. This will result in many businesses who have used manual, or less sophisticated systems to purchase an approved accounts software to achieve these mandatory requirements.
For all businesses who don’t have a suitable software solution inside their business, they will have to purchase a solution that incorporates MTD within their software to meet all of the requirements of the service. Sage accountancy software is a great solution for businesses needing to use digital software for the first time or that need to bring it inhouse from a third-party provider. Sage will help to get the business ready for MTD for VAT, as well as any other regulations in the future. As Sage states within their MTD guide:
‘Based on the result of 1,398 interviews of SME’s and accountants based in the UK, on average a small to medium size business can save 27.6 days a year by using digital accounting software in comparison to using manual methods, therefore giving precious time back to focus on growing the business.’[i]
To ensure compliance to MTD, businesses will need to digitally record and submit individual invoices, both sales and purchase including the time of supply/purchase, the value of the supply/purchase and the rate of VAT charged/claimed. In order to achieve this, many companies who may use manual or electronic systems that account for their sales and purchases but not individually, will need to change to an accredited system such as Sage.
If you are an online retailer, you will be MTD compliant if you currently use Tradebox software. As the UK market leaders in integrating ecommerce businesses sales from multiple platforms into Sage 50, Tradebox will be a perfect partner to ensure MTD requirements are met. As a Sage Gold Partner, accredited through their rigorous software test and working in close partnership with them since 2006, Tradebox are perfectly placed to guide our existing and new customers through MTD from 1st April 2019.
As Stephen Bales, MD of Tradebox explains:
“For every online retailer using Tradebox One software, every transaction will be recorded digitally and if they use Sage 50, will be automatically recorded into the software which will all be compliant for MTD. With the average online retailer selling large volumes of units per week, using Tradebox One has the added bonus of removing the data entry burden.”
If you would like to find out more about Tradebox and Sage 50, please visit www.tradebox.co.uk or go straight to a 14-day Free Trial of the software here. We have a 5* customer support team who will field any questions and take you through set up of the software as part of our complimentary service.
[i] https://www.sage.com/en-gb/news/press-releases/2018/04/moving-to-digital-accounting-results-in-cost-savings/ Save Time