Introduction to Making Tax Digital

Making tax digital is a great initiative taken by HMRC which is going to take place on April 1, 2019. It is started for all VAT registered businesses with turnover of £85,000 or above VAT threshold to submit their VAT data digitally to HMRC through compatible software but not using the HMRC online portal. Every business or organization should take appropriate guidance for making tax digital for VAT as they need updated software to comply with the new requirements. Old software versions will not work after April 1, 2019. Making Tax Digital Compliant software will have to be used to submit VAT returns. These changes will apply to almost all UK VAT registered persons, even to charitable organizations as well as overseas businesses. However, all companies maintaining VAT records manually will need to implement accounting software from the scratch but companies which are already using the software must ensure that the software is MTD compliant. Don’t be fooled that all software’s are going to be MTD compliant as some older versions are not working. Many software suppliers told HMRC that they are interested in providing software to the businesses for making tax digital for VAT. HMRC is also working with many software suppliers to test their software in HMRC’s testing environment and many suppliers demonstrated their software to HMRC too. HMRC is working with 100’s of software suppliers and testing these software’s in their environment for MTD for VAT in time before April 2019. HMRC updates the list of software suppliers on the website time to time. Some of the software supplier’s names are given below –
  • Nomisma - It will be MTD compatible before the final deadline i.e. April 1, 2019. It is also on HMRC development list for MTD for VAT and it will be live very soon.
  • Abratax
  • Access group
  • Accounts portal
  • Bridge squared
  • Capium limited
  • DC software
  • Easy books
  • EY
  • Free agent
  • Go simple software
  • Hartigan software
  • IRIS
  • KPMG
  • Landmark systems ltd
  • MAM software ltd
  • Nation Wilcox systems limited
  • Omni
  • Red sky
  • SAP
  • Thomson Reuters – ONE SOURCE
  • Vital code ltd
  • Wolters Kluwer

Features of Making Tax Digital Compatible Software

  • It records and secures your data in an electronic form up to 6 years.
  • It receives information from HMRC.
  • It creates a VAT return using digital records.
  • It uses Application programming software to link to HMRC’s system.

Announcement by other Software companies

  • SAGE50/ SAGE 50 Cloud accounts SAGE recently announced that there will be no updates or upgradation to the software for SAGE50 version 23. Businesses & organizations using 23 or an older version are needed to upgrade to the latest version of SAGE 50 cloud accounts i.e. SAGE 50 cloud accounts version 24 by paying monthly or subscribing to the annual subscription to receive MTD updates on regular basis. They also clarified that only a SAGE 50 Cloud accounts is MTD compliant, not all versions.
  • Quick books doorstep Quick books released a statement that the customers should have a latest version of the accounting software to receive all MTD updates & upgrades. Businesses can install them as soon as they will be released.
  • Cloud based Cloud based accounting is updated regularly and certainly the software which will be compatible by next April. Other companies like free agent, sage one, quick books online confirmed that they all will be MTD compatible before the final deadline i.e. April 1, 2019.
  • Bespoke desktop software Some of the software developers are not making their software fully MTD compliant. Therefore, the businesses should contact their service providers to make sure that whether they are making their software MTD compliant or not. Businesses have plenty of time to research & decide that what compatible software they want to choose and from which software company they want to purchase (If the current is not making their software fully MTD compliant).
  • Bridging software Bridging software is something different. It is designed to bridge the gap between spreadsheets and provides an application programming interface to link with HMRC’s system. This is done so that businesses working on spreadsheets need not switch to brand new software completely leaving behind their beloved spreadsheets.

Details needed to be furnished in Making Tax Digital Compatible Software for Digital Submission of VAT details

  • Firstly, set up your company information such as company name, contact information and company address.
  • Secondly, Input your VAT information such as VAT registration number, VAT schemes and filing frequency to make digital submission of VAT return to HMRC.
  • Once you have inputted your company and VAT information, you can send the invoice to that particular software company and they will submit the details to HMRC after checking the same.
If we take the last 20 years, MTD is expected to be the biggest change to the tax administration system of UK. Every small or large business should have MTD compatible software to file their VAT returns digitally on time without any delay. VAT changes are just the starting point and it is expected that MTD will apply to income tax and corporation tax from April 2020.