Making Tax Digital (MTD)

Digitising Finance in the UK

Making Tax Digital (MTD) is a key part of the UK government’s initiative towards becoming one of the most digitally advanced tax administrations in the world. The goal is to simplify the tax process, making it easier for individuals and corporations to get their taxes right and stay in compliance which, by extension, will close the existing UK tax gap.

What is Making Tax Digital (MTD)?

Making Tax Digital (MTD) is the new multi-step plan designed to bring Her Majesty’s Revenue & Customs (HMRC) and all businesses into the digital age while making tax returns faster, more efficient, and more accurate.

With avoidable mistakes costing the Exchequer billions in taxes each year through either over or underpayment, businesses must keep digitally linked records and accounts to manage their VAT records. They are also required to use MTD-compatible software to submit digital returns to the government. While this seems like a lot of work, there are significant benefits including:

A more comprehensive digital record-keeping system that can send information directly to the HMRC, reducing the amount of tax lost to human error.
Timely payments, eliminating penalties and supporting a better operation cash flow.
Easily accessible digital business information that improves service, strengthens communication between buyers and suppliers, and helps make strategic decisions.
An environment that supports and encourages faster digital transformation and digital engagement in organizations.
Every small business owner and individual taxpayer has access to an online business tax account that can be used to check HMRC records and manage details.

Additionally, MTD encourages businesses to go fully paperless as paper income and expense records will eventually no longer comply with tax rules.

Making Tax Digital for VAT Accounting Software

The MTD initiatives requires that all tax submissions be made digitally. This can be done using MTD-compatible third-party software or, in the case of businesses who have limited technology resources, spreadsheet bridging software. You can find a list of compatible software on the HMRC website here.

In HMRC’s own words:

“The nudges and prompts that will be incorporated into the Making Tax Digital compatible software developed by third party software providers will help eliminate common errors, giving businesses greater certainty that they’ve got their tax right first time, reducing the need for unwelcome compliance interventions which are expensive and burdensome for both HMRC and its customers.”

How Yooz Accounts Payable Automation Can Help

Business face multiple challenges complying with MTD requirements. Not only do they need to keep records in a digital format, but they must also preserve these records for up to 6 years. Businesses are also required to ensure that all data transactions are digitally stored and readily available as part of creating a clear “digital journey.”

Yooz can help.

The Yooz invoice automation solution streamlines the accounts payable process, digesting and digitizing invoices, capturing and validating data, and communicating in real-time with your existing accounting system. By eliminating the manual and error-prone tasks associated with a paper-based process, your business is left with clean data that increases the accuracy of reporting and paying taxes.

Yooz also stores all the data in the cloud, creating a digital record that is MTD compliant and ensuring that all necessary documents are readily available anytime from anywhere with a touch of a button.

“Reducing the huge amount of time and money lost to tax bureaucracy would free up billions for investment, upskilling and digitalisation. We’ve always said that – rolled-out in the right way – MTD could mean productivity gains over the long-term."

- FSB National Chairman Mike Cherry

Learn more about MTD below:

MTD for VAT: Top Questions Surrounding Making Tax Digital

Making Tax Digital (MTD) is the UK government’s initiative towards becoming one of the most digitally advanced tax administrations in the world. Its purpose is twofold: to simplify tax accounting for business and individuals which, in extension, will help close the UK’s tax gap. This initiative started in 2019 with VAT-registered businesses.

Here are some of the frequently asked questions – and answers – about what is Making Tax Digital.

Four Out of Five UK Businesses Still Not Ready for Making Tax Digital

The time has come but where do things stand when it comes to UK businesses and Making Tax Digital? Learn about some of the results from the Yooz survey of over 200 UK finance leaders.

Making Tax Digital Phase 2: Are Businesses Ready?

There is an every-growing list of regulations associated with MTD, especially as new phases are implemented. When it comes to UK businesses and the implications of Making Tax Digital are businesses ready for Phase 2 of the initiative?

Webinar: From physical to digital invoicing: are you compliant?

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