Making Tax Digital (MTD) is a new initiative of HMRC to complete tax records and returns digitally online. The main goal behind MTD for VAT is to go completely paperless for accounting needs. This is a great initiative to handle all tax returns related processes online without maintaining several files and records manually.

The concept of this digital tax management was brought to market in April 2019, and people were given some time to adapt to this new system. However, surveys show that this digital effort became more useful for businesses as well as individuals to help them keep their tax affairs on top priority.

What is MTD for VAT?

MTD for VAT became effective in the business industry right from 1st April 2019. As per these regulations, all the VAT registered businesses in the country that have a taxable turnover above the VAT registration threshold of £ 85000 per year need to maintain their accounting related records digitally. Moreover, they are advised to use the digital tax filing process through HMRC online software terminal.

As per HMRC, the digital records that you need to maintain include VAT number, business name, business contact details, information of VAT schemes used in the past, VAT on received and transferred supplies, adjustment over returns, tax point, VAT rate charged on supplies, daily gross tracking in case of the retail scheme, value of sales, and documents covering a range of supplies.

The professionals at HMRC advise business owners and individuals to use compatible digital software to file returns. These latest tools can help people to maintain their records in digital form, and they can be preserved for up to six years with ease. It is also possible to use spreadsheets to summarize and calculate VAT transactions. But at the end of the day, you may need a compatible software tool to send the relevant information to the HMRC system automatically.

Use a compatible software for MTD for VAT

With the advancements in the technology sector, it is widely popular for businesses to maintain their records in electronic format. However, as per the latest MTD guidelines, the companies need to use some functional and compatible software tools to process this digitally stored information. The software tools can further help to calculate VAT returns while making it pretty simple to submit relevant data to HMRC software online.

The chances are that some of your old accounting software may have the ability to update to this new digital system, or you may need to invest in a whole new accounting solution. One of the best recommendations from experts is to use cloud-based software that can help you access data on a real-time basis through any of the available devices such as a tablet, mobile phone, and computer. You can contact your software vendor to know relevant details about the features and compatibility of selected MTD VAT software. In case if you are using spreadsheets to maintain your VAT records, in that case, you may need MTD compatible bridging software to meet the mandate of HMRC.