The government is pressing ahead with its plan to become one of the most digitally–advanced tax administrations in the world. This has implications for dealers.
This is because the Making Tax Digital (MTD) for VAT initiative is soon going to make it mandatory for any business operating above the £85,000 VAT threshold to submit digital VAT tax returns. This means the vast majority of dealers will be required to use the new MTD service, keep records digitally and use software to submit their VAT Returns online.
There are all sorts of complexities regarding what a digital link means, but during the MTD ‘soft landing’ period up until April 2020, digital links can be as simple as cutting and pasting figures.
There’s only a requirement for tax records to be stored digitally – whether that’s in an Excel spreadsheet or a back-office system like ECI Horizon, collated and then submitted to HMRC via a digital link.
However, this is now set to change as, after April next year, the government will become stricter and copying–and–pasting will no longer be acceptable.
On the Horizon
This year ECI made an exciting announcement: that the business had created an MTD portal, enabling dealers to submit their VAT returns to HMRC directly from the system. The aim is to enable ECI customers to more effectively comply with the new rules.
ECI’s software allows customers to keep their records in digital form, as required, creates a VAT return from those records and communicates, as needed, with HMRC on the customer’s behalf.
Opting for a back-office system to manage the VAT payment process not only cuts down on admin while encouraging customers to more efficiently keep their own records.
This, best practice means a consistent record of transactions, at source, in the right way and when it comes to tax return time, it’s a case of clicking a couple of buttons which, in turn, means there is less scope for mistakes.
Simple and secure
But this doesn’t mean that data is constantly leaving your business for HMRC, as some have raised concerns about.
There is a bit of nervousness about what MTD means; some worry it’s a constant drip-feed of transactional data to HMRC, which goes off and calculates your tax return – that’s not the case.
ECI Horizon will calculate your tax return but it’s up to you to review the numbers and hit the ‘submit’ button.
A major benefit of MTD is that it’s a major time – and, therefore, money – saver. In the past dealers have had to run reports out of their systems, possibly do some manual manipulation outside of the system to get the figures they need.
Now, with all records kept in one place, calculating a VAT return is as easy as clicking a button. We should praise the government’s progressive focus and be thankful for the money it will save dealers.
Dan Noble, a product expert at ECI, will be debunking the myths and demystifying Making Tax Digital at Dealer Support Live helping dealers with tips to transform their business and alleviate the stress of financial year-end.
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