Why has the government introduced Making Tax Digital for VAT?
HMRC have issued VAT notice 700 / 22 (Making Tax Digital for VAT) so that accountants and businesses will be able to efficiently file and preserve records digitally going forward. The modernised process, will comply with the legal requirement of submitting VAT records using software, enhance user-performance, and is set to generate £1 billion in additional revenue by 2023.
For all VATable businesses, swapping to accounting software is inevitable. Come April 2022, paper based VAT return forms and VAT-return submissions via the HMRC VAT portal will become things of the past. See below, for how to get with the times, and prepare for the VAT deadline.
What to know and what to do
The first step to Making Tax Digital for VAT is to find out if your business / your clients businesses are eligible. For some this is pretty straight forward, but for up-coming, fairly new businesses this may not be as clear. If you suspect that you could be eligible, the best thing to do is to begin the switchover process now, to ensure you’re compliant with the new MT. law if applicable.
The law will be active from the first day of your first VAT period, which begins on or after April 1st 2022.
What are the benefits of going Digital?
It’s time effective. Submit VAT returns at the click of a button, using accounting software. Avoid time spent searching, wading through and amending VAT documentation, whereby the final outcome is likely to be invalid, incurring further time wastage.
Submit valid figures. Avoid using multiple, unclear spreadsheets that can incur errors. When inputting data, it is incredibly easy for mistakes to be made, which can lead to fees for submitting incorrect payment information.
Some business owners or accountants will have become so accustomed to using Microsoft Excel, hesitant to hop aboard the accounting software train. Yet the reason that Tax is becoming Digital is to move away from errors and potential data loss, of which are caused by spreadsheets.
For instance, if your document goes missing, your computer breaks or your file is corrupted you will lose invaluable data that is no longer accessible – you may have created backup copies, however not everyone does, when there are multiple adaptations of spreadsheets to replicate. HMRC states that “by law, VAT records must be kept and preserved” thus making the spreadsheet process unlikely to meet the requirements when it comes to MTD for VAT – or indeed MTD for any other kind of business tax from 2022 onwards.
Choose Pandle – Cloud Accountancy Software
Place your trust in us. Using cloud-based accountancy software such as Pandle, helps to eliminate loss of data and data error. Effortlessly upload receipts and import bank feeds to collectively store and protect all data collectively in the cloud.
Our user-friendly software maximises data validity, preventing error of commission and omission – let Pandle do the hard work for you. Our software calculates your VAT, so you can seamlessly submit your returns through a click of a button; simply click “Add new VAT return” to distribute your returns.
Always gain access to your books from any device, whenever, wherever with Pandle.
For now, adopting accounting software is only necessary for submitting VAT returns, which isn’t currently relevant for all businesses. However, Making Tax Digital is certain for other types of business taxes such as corporation tax that will begin commencing 2024 and onwards. This means, the sooner you convert and get to grips with accounting software, the better. Save costs on outsourcing human resources and invest in Pandle, where you’ll take control of your accounts independently, confidently and with ease. Invest your newfound time from calculating, inputting and cross-examining data, into your business.
