Now that HMRC has introduced compulsory adoption of Making Tax Digital for all VAT-registered businesses, it’s essential that businesses keep the right financial records and submit their VAT returns in the right way. This is now mandatory in the UK so every VAT-registered business should know about these rules.
Corporation Tax: currently it is not mandatory for businesses to use Making Tax Digital for corporation tax though according to the HMRC website this will be introduced from 2026.
Income Tax: For self-employed businesses (and landlords) with income over £10K pa will be required to follow the new digital rules from 6th April 2024.
All VAT-registered businesses are required to follow the Making Tax Digital rules by keeping digital records and using software to submit their VAT returns.
So why are we talking about it?
It’s really just a quick reminder that when you’re using software in your business that links all your operational functions together, it makes keeping digital records an awful lot easier.
For systems like Merchanter, which have a high degree of interoperability (i.e. it integrates well with other platforms), it’s dead easy: as the system will be integrated with your financial platform already (Sage, Xero, QuickBooks etc), that platform will have all the information necessary to keep you VAT compliant.
Generating invoices digitally is really easy (and automated), and your sales ledger will automatically be linked with the financial platform, so digital reporting becomes a piece of cake. (OK, maybe not cake – it’s still tax, after all – but it’s a whole lot easier and quicker than having to duplicate everything manually.)
Some ERP systems have in-built financial systems which are no doubt compatible with the new regulations, so those should keep things simple too.
If you are still using a manual system to run your business, it’s all still perfectly possible, though of course you will need the right software for submitting your VAT returns and financial records. It’s worth noting, however, that it is becoming increasingly expected for businesses to operate digitally, and the efficiencies on offer are really quite significant.
If you would like to have a chat about how to go about implementing a cloud-based ERP system which can integrate with your existing accounts platform, please get in touch: info@ten-25.co.uk
