Making Tax Digital (MTD) was launched on 1st April 2019 and represents the beginning of a new era HRMC. Under this new government initiative, HRMC is taking the first steps towards being a fully digital tax administration, starting with VAT tax. 

VAT-registered businesses that have a taxable turnover above the registered threshold f £85,000 must use MTD compliant software for their tax processes, including filing their tax returns and the storage of all tax records. 

By making all VAT tax processes 100% digital, both HRMC and VAT-registered businesses can expect a more streamlined tax process that is quicker, more efficient, and produces fewer errors. Should you meet the current requirements for MTD, it’s important to make sure you are using MTD software for the upcoming tax year. 

You Can Be Fined 

Any VAT-registered business that has a taxable turnover that meets the current threshold of £85,000 must ensure they use MTD software – it’s now a legal requirement as of the 1st April 2019. This also means any accountancy firm working on behalf of a business that meets MTD requirements must use compliant software too. 

There is a six-month period that allows businesses to get up to speed with MTD compliance but if you miss this deadline for VAT tax returns then you will be fined. This begins with a penalty point system where you are given penalties for every deadline missed, and after four points are accumulated you are then given a monetary fine. 

Should you comply with MTD by using MTD software to store and file taxes before all subsequent deadlines, you can reduce your penalty points and avoid a fine. Make sure to get MTD compliant software asap to avoid a costly fine!

MTD Software Improves Tax Process 

The main goal of using software for tax processes under MTD is to make everything quicker and easier for businesses and HRMC. So, if you use MTD software you can expect your tax processes to become more streamlined. 

For instance, because all tax data is stored on a single software solution, you have access to all the necessary tax data on a single system, while filing taxes becomes quicker because data, invoices, and records that are normally input manually are automatically uploaded using the software. 

MTD Software Results in Fewer Errors 

MTD software reduces errors common in tax returns by automating processes that would otherwise be done manually. As a result, the software can eliminate human errors in tax returns to avoid the risk of being fined. 

For instance, manually copying tax records from one file to another can often result in accidental errors. MTD software can automatically upload data from one system to another, meaning no chance of errors. The same can be said for invoices, which are automatically scanned and uploaded using MTD software. 

While most businesses or accountants will spot the errors before filing returns, it’s incredibly stressful and time-consuming to find the problem, so by using MTD software you can avoid any of these problems going forward.