How to comply with HMRC's MTD for VAT digital link requirements.
Making Tax Digital (MTD) regulations changed on April 1, 2021. It's not enough to simply use software to file your VAT return. You must now consider where your data comes from and how it enters your accounting records.
What is Making Tax Digital (MTD)?
Making Tax Digital for VAT mandates that VAT-registered enterprises with taxable revenue exceeding the VAT registration threshold keep digital records and file their VAT returns using the software.
Business records and accounts are increasingly being kept digitally, via a software program or application on computers, tablets, and smartphones. These devices keep track of the recordings, which are then kept in a cloud-based program.
What are Digital Links?
“Where a transfer or exchange of data is made (or can be made) electronically between software programs, products, or applications,” according to HMRC.
When you're transporting data from one system to another, it's easiest to think about digital links. If your company sells things online, for example, you'll have a shopping cart on your website that keeps track of all sales. You'll have accounting records as well. To electronically transfer data from your shopping cart to your accounting records, you'll need a digital link.
It is not necessary to have everything set up to automatically link. A report can be downloaded from one system and imported into another. However, instead of manually entering data, you'll need digital linkages to transfer data.
What records do you need to keep digitally?
For every sale digital record of the following need to be kept:
You'll also require a digital record of your outgoings, as they'll account for a portion of the VAT you claim on your VAT return. The digital information you need to preserve is pretty comparable to what you need for your sales.
Some of the guidelines for what to do when selling things with different VAT rates can be confusing. You can get guided by our expert Accountants for VAT related services.
How do you get started?
You must first comprehend your data flows before attempting to establish digital links. One of the first things we do when we start working with a new client is map their systems. Before you try to connect your program, be sure you understand what you're using and why.
We can assist you with mapping your systems and determining where digital connections are needed. Please contact us or your local Accountants in London to learn more about our accounting system audit.
Contact Taj Accountants
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DISCLAIMER: The purpose of the blog is to provide information and insight regarding the situation. The readers must contact experts before making any decisions based on the information. We highly appreciate you contacting Taj Accountants for further assistance.