Myths and facts around Making Tax Digital MTD for businesses
Making Tax Digital, the initiative from HMRC is coming in to play.
It initially going to impact VAT registered businesses and then the self-employed. In essence, if you’re a VAT registered business you need to do a few things in order to remain compliant with HMRC. There are a lot of myths and confusion around MTD, here I’ll try debunk a few.
You need to file your VAT return through approved software. Fact. You will need to use approved software to file your VAT return once MTD kicks in. This can be typically an accounting software such as Xero or QuickBooks or an Excel plugin which will be made by private software companies.
You need to electronically store your Invoices and expense receipts. Fact. Yes, you need to keep a digital copy of these documents.
You can only keep a digital copy via an approved software? - Myth. You can in fact simply take a picture of your bills / purchase invoices on your mobile phone and keep it there. I would recommend backing up the images on your OneDrive / icloud as you still need to keep these documents for a number of years just in case HMRC come knocking.
I have to pay more VAT over to HMRC - Myth. You don’t unless the VAT rate increases, which it hasn’t, you will not be paying a penny more for the tax you owe HMRC.
Everyone has to register for VAT - Myth. Only businesses with taxable turnover over the threshold (currently £85,000) must register for VAT with HMRC. For businesses who have never exceeded the threshold will be exempt from Making Tax Digital. You will therefore need to keep an eye on your taxable turnover, especially if you think it is close to the VAT registration threshold.