Businesses which meet certain stipulations of the government’s new initiative, Making Tax Digital for VAT, are required to keep their financial records in a digital form as opposed to using paperwork. This includes businesses which meet a VAT threshold of £85,000.
So what does this mean for your business? Organisations that do not have a Making Tax Digital software will have to implement one in the workplace.
It’s essential for you first understand how the accounting software will make you compliant and what is required by HMRC for the platform to be compatible with its systems.
Remember that your software should be able to communicate adequately with HMRC’s programmes. When getting an accounting software, you should confirm if it can execute the following functions:
- Record data
The software should be able to record your business’ financial data effectively. This data doesn’t only entail your business details, but also any records regarding the transactions you’ve carried out. These should be kept accurately for a period of no less than six years.
- Store information regarding VAT (paid or withheld)
While recording and storing all data on the transactions carried out, your software should be able to include every detail of the transaction and the VAT involved. This should also include the dates of the transactions. Check out some of the main issues you might face for Making Tax Digital for VAT.
- Make calculations
Your chosen software should have the functionality to make calculations. The relevant calculations, in this case, will be the amount your business owes based on your incomings and outgoings. The calculations made by your software should be accurate and free of errors.
- Communicates with HMRC system
Cross-platform communication is integral for your new software. If you are updating information and business data, it should be relevant to any previous information stored by HMRC. This means that the software requires a direction connection. For this reason you’ll also need to have installed a software system that is up-to-date. Making Tax Digital requires an entirely digital and automated system without manual intervention. This means that digital links must communicate directly between your software and the programme. Digital links refers to entities such as: cells on spreadsheets, API transfers, XML imports or exports, CSV exports and imports, emailing spreadsheets, memory sticks and other portable media. These links will take part in transfers, modification, recapturing and copy and pasting.
Until 2020, it will not be compulsory for businesses to have all links in place. Until then, HMRC will provide a soft landing for the digital links. After the 2020 deadline businesses are expected to have found means to set the links up themselves.
Install Your MTD Software Today
It’s important to install, and get your team familiar with, your MTD for VAT software before the start of April this year. Get started today by choosing the software that’s right for you.