Since April 1st 2019 it becomes necessary for all VAT registered businesses and all UK businesses with a turnover threshold over £85,000 to be registered for HMRC MTD (Making Tax Digital).
"Making Tax Digital" is exactly as it sounds. HMRC are pushing for businesses to improve their digital record keeping and allow for a more seamless flow of information between the business and their own systems. What makes this special is that this is the first time that they haven't produced tools themselves for UK businesses and have instead relied on the plethora of privately developed software products that already exist.
Neetrix is fully compliant and recognised by HMRC to support MTD for processing and submitting VAT returns to them. In fact you can submit your VAT returns prior to the April 2019 deadline should you wish.
Since MTD is still a misunderstood procedure, we thought we would list a few useful facts to help you understand it better based on questions we have received and conversations we've had over the years with HMRC.
Q) When will making tax digital be enforced by HMRC?
A) From the 1st of April, however note that means returns made AFTER that date and not for returns before. So your VAT return for the 31st March 2019 will NOT have to be submitted via the making tax digital service although, as long as you are registered, you can still do so with Neetrix which is what we would recommend so you understand how the new process will work.
Q) Does MTD mean that the government are analysing all of our business transactions?
A) No. When tax returns are made with the new making tax digital service, they are not sending any more transaction information from your accounting system than when you were submitting them previously via paper or through the HMRC website.
Q) What do I have to do to be compliant with MTD?
A) This is a slightly larger question than people have been lead to believe. Firstly, you need to register your business for MTD. You only need to do this if you are VAT registered or your business has an turnover over £85,000 (as of writing). You can do this via the following area on HMRCs website (https://www.gov.uk/guidance/use-software-to-submit-your-vat-returns). This can take 2 working days to complete. Don't do anything else until you have received confirmation that your business has been accepted into the MTD services.
Next you can register your HMRC account with Neetrix. Log into Neetrix and go to the Accounting > Settings area. Click on "HMRC Making Tax Digital", and click the "Authorise" button. You will be taken to the HMRC website where they will ask you to log into your HMRC account and then ask you to confirm that you wish to allow Neetrix to view and update your VAT information. Confirm this, and you will be taken back to Neetrix where you will see that you are now "Authorised". Next add your 9 digit VAT number into the Vat Registration Number box. After you click Save, you can request Neetrix to check that your number is valid. If everything is OK, you'll get a confirmation that the VAT number is correct and you are now ready to get details of VAT returns due, returns made, payments made and, of course, submit new returns. You'll find this in the usual VAT Return section under Accounting > Reports.
Using an HMRC recognised Accounting software for MTD submission will NOT make you fully compliant, though it is one of the key requirements.
This will make you compliant with HMRC MTD as far as digitally submitting your VAT returns, but there is more that you need to be aware of regarding generating and sending VAT invoices and receipts.
The last part to being compliant is that you have to keep digital records of all your VAT invoices and receipts that you have sent. Since you are using Neetrix, that will be taken care of for you, but one thing to keep in mind also is that if you are generating the invoices anywhere else, you are not allowed to manually enter them again into an accounting system. They have to be digitally imported or transferred. For most Neetrix users, this won't be an issue since Neetrix is a whole of business solution available over the internet, its highly unlikely that you are creating invoices outside of the system no matter how many departments and where you are geographically positioned. However a lot of people that are using book keepers and accountants with standalone accounting systems will commonly generate invoices in software like Excel and Word or perhaps a separate quotation system and then have those invoices copied into the accounting system. Under the Making Tax Digital rules, you are no longer allowed to do this. If you are doing this, we highly recommend speaking to one of solutions team here at Neetrix who can show you how you will no longer need to duplicate such work with a system like Neetrix whilst becoming compliant too.
If you are still unsure about what you need to do or have questions, you can either ask someone from the HMRC support services, or feel free to ask one of the members of the Neetrix team who will always be happy to help you out.