Making Tax Digital (MTD) has been introduced by HMRC to help individuals and businesses to get their tax right. It means many people are leaving their spreadsheets or paper records behind and moving over to a new system.
At the moment, Making Tax Digital is all about VAT submissions. But over the coming months and years it will include Income Tax and Corporation Tax too.
How do businesses comply?
To comply with Making Tax Digital for VAT, businesses have to keep digital records. This must be done using what HMRC calls ‘compatible software’. In other words, it must be able to connect directly to HMRC and send your details to them using digital links.
What is an MTD digital link?
HMRC defines digital links as having two key characteristics:
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Data is transferred electronically between software programs, products or applications. A digital link includes linked cells in spreadsheets, for example, if you have a formula in one sheet that mirrors the source’s value in another cell, then the cells are linked.
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The transfer is automated. It doesn’t need manual intervention such as copying over the data by hand or manually moving data between two or more pieces of software. But you can, of course, click a button to initiate the process.
HMRC also accepts the following as digital links:
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Emailing a spreadsheet containing digital records, so the information can be imported into another software product
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Transferring a set of digital records onto a portable device (for example, a pen drive, memory stick or flash drive) and physically giving this to someone else, who then imports the data into their software
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XML, CSV import and export, and download and upload of files
When will MTD affect me?
MTD was introduced for nearly all VAT-registered businesses with a taxable turnover above £85,000 in April 2019. They have to use Making Tax Digital software to keep digital records and make VAT submissions to HMRC.
From April 2022, this will be extended to all VAT-registered businesses in the UK.
You’re in the right place to get ready. QuickBooks’ HMRC-recognised MTD software is designed for small businesses.
Find out here if you need to comply with MTD
Learn more:
This article originally appeared on The QuickBooks Resource Center and was syndicated by MediaFeed.org.
Featured Image Credit: DepositPhotos.com.
