Well, it finally arrived on 1st April and without that much of a fanfare...
But it's here with us nevertheless. Making Tax Digital is live and compulsory although for the moment only for VAT registered businesses with turnover of over more than £85,000... with a few exceptions.
Other VAT registered business, corporation tax and even personal tax will be coming on stream with MTD over the next couple of years.
Like anything new we're experiencing a wide spectrum of responses... from the 'great, this is a brilliant new system' to the 'I'll just keep doing it the way I used to do it' (which isn't an option, by the way).
The main change for the moment is the way that businesses file their VAT returns.
What this means is that a business has to use Functional Compatible Software to file their VAT returns.
What is Functional Compatible Software?
Well, in lay mans's terms - which, to be entirely honest, is the only way I can understand it - it's software that can communicate directly with HMRC and can receive information from HMRC in return.
The software could be one piece of software or linked software. But if it's linked it has be via what's been dubbed a 'digital connection'. So an upload of information directly from a bank feed to a bookkeeping package is a digital link. A copy and paste from one spreadsheet to another isn't.
In a practical sense this is a pretty major change. What used to happen with VAT returns is that we'd calculate the VAT figure - either on spreadsheets or in cloud based bookkeeping systems - and then we'd type to same information into HMRC's website.
And it's this typing that HMRC is keen to get rid of.
What's going to happen in the future is that VAT returns are going to be compiled on Functional Compatible Software (or on a platform which has the same functionality) and filed directly to HMRC.
With me so far?
No?
Okay - if you are subject to MTD you essentially have two choices. Either you start using a cloud based bookkeeping system which has been signed off by HMRC or you buy what's known as Bridging Software.
Bridging Software is a piece of code that is embedded in a spreadsheet which allows it to communicate with HMRC.
What's our stance on this (I think) I hear you ask?
Well, bridging software is fine but there's a cost attached and that cost only gives you the ability to file your VAT returns, in other words to do what you already do.
However, cloud based bookkeeping software has a cost but gives so many enhanced features that will save you time and effort (such as hooking up your bank accounts so that all you do is categorise and match transactions) that we believe in the vast majority of cases a move from spreadsheets to digital bookkeeping is the best thing for a business.
If you'd like to find out more about our cloud based bookkeeping and enhanced data capture software just give us a buzz and we'll arrange a demo with you.
0131 202 9888
