Answers to Top 10 Making Tax Digital Questions
1. What is Making Tax Digital?
MTD (Making Tax Digital) is a part of HMRC’s plan to transform the current system into one of the most digitally progressive tax administration. The vision of the HMRC is that the paper tax return will be abolished to enable taxpayers to update the frequency on their income position with having the real-time idea on tax liabilities presented by digital tax account. With this system, we can assure that the future of record keeping will go digital with including the ability to track sales and costs in real-time with automating the manual task. Move to the cloud-based accounting system which gives access to the same financial information to monitor the margins and profitability. Use proactive advice on tax and business issues when you need them the most.
2. Who will affect by Making Tax Digital Software?
The change will affect every individual and businesses where the individual taxpayer whose tax affairs annual income via Personal Tax Account based on information provided by HMRC. The personal digital accounts are already, but one need to activate it via government gateway. For businesses, personal digital tax accounts a self-employed person or landlord with rental income of more than £10,000 should have a tax account. Additionally, Companies and partnerships will have their business tax account where they can file the tax returns online. The only significant change is that they’ll need to pay quarterly instead of annually. With this, we can say that Making Tax Digital software represents a significant challenge for businesses.Also Read: Why Your Business Can’t Ignore Making Tax Digital?
3. Is there any streamline plans that reports for simple businesses?
If we look into the rules then the option to account for income and expenditure on simplified cash in, cash out basis will extend to businesses turnover below £150,000. Which means that many will no longer need an account on an accruals basis based on the difference between money one have taken in. One needs to pay out on income that they have already received. Also, we are looking for online tools that capture and record initial transaction like property expenses, rental income which are likely to make cost-effective solutions for simple businesses. For businesses, one needs to take relatively few transactions with full accounting package that are unlikely to be required.
4. How will Making Tax Digital for Business affect anyone?
With using the software one need to submit VAT returns and doing so, you’ll go through HMRC website from where you can get current online tax return services withdrawn to fall within the scope of the Making Tax Digital software rules. If anyone is using accounting software, then you might know about the MTD compatible. Probably you need to start using the features that are cloud-based and can be used automatically with Making Tax Digital Software compliant. With Making Tax Digital for VAT , one can get a continuous challenge to issue the paper-based invoice where one need to transfer it on at least some point of data. Using the MTD deadline to switch to Making Tax Digital software sooner rather than later widely changing internal tax and business practices. By doing this, you’ll get to know how to avoid the inevitable congestion that gives rise to the businesses that left things undone.
5. From which date the changes will happen?
This is one of the essential questions that one needs to know. Although the initial timetable is given, one needs to stay amended to take a look at what is planned for phased introduction. Businesses with profits chargeable will pay class 4 national insurance with a turnover and rents in excess to the VAT threshold of (£85,000).In the year 2019, April the VAT element of tax compliance for VAT will register for businesses with paying corporation tax excluding VAT.
6. What are the benefits of making tax digital?
You are making Tax Digital should give a clear and more accurate picture of your tax affairs by making proper calculations. One needs to have a proper snapshot in real-time based on the tax one owe at one time. With this one will get easier to plan the budget for tax payment and wait until the end of the tax year. Once you get the tax information at one place, you should streamline the whole process of interacting with HMRC with making it faster and requiring fewer efforts.
7. Will there be any penalties for not filing quarterly?
HMRC has indicated that there will be lenient for the first 12 months which allows taxpayers to get rid of the new way of filing returns. With using this, anyone can miss the deadline they will be penalised using the points-based system. Once you receive a fixed number of points, it will result in a fixed penalty. The detail of the penalty is not yet announced.
8. With this, do I need to complete annual accounts?
All businesses and companies need to prepare and file annual accounts since you need to make at the end of the year submission. The fifth return will have to be submitted within ten months of the end of the fourth quarter. This is likely to behave simpler than current returns where HMRC will hold data from quarterly reports.
9. Which software should I use to report tax returns to HMRC digitally?
Making Tax Digital for Business will require accounting system to ensure that they’ll be able to produce quarterly information insufficient with preparing a quarterly tax report. We help the smallest businesses and the landlords to provide free software which are unlikely eligible for assistance to seek outside accounting software advice and packages.
10. Do you think Making Tax Digital with SAP Business One is beneficial?
Making Tax Digital aims to use digital accounts to handle tax and VAT in real-time where the first deadline for using the new system is April 2019. This will enable the user to schedule reminders for VAT declaration and to check potential request manually at any time. You can check the payment transaction that is processed by HMRC. The SAP project is ongoing over the past few months and will soon start beta Programme to garner feedback about the system with making required refinements.
Do I have to do this?
There are very few exemptions (Digitally excluded people which includes an individual whose income is from both property and trade is less at a lower level) who didn’t have to do this, but this exemption is yet to confirm. So later we need to check the possibility of exclusion exemption to know if you need to use accounting software to upgrade with Making Tax Digital. For more information, you can contact us or request a quote directly.