Making Tax Digital
for EPoS Systems
What is Making Tax Digital (MTD)?
As of 1st April 2019, over half a million of VAT registered UK business need to comply with the new taxation standard called Making Tax Digital. These businesses must now keep digital records of their transactions and submit VAT returns using a digital link to HMRC.
From April 2019, quarterly reporting is Mandatory for VAT for all VAT-registered businesses with a turnover over £85,000 and optional for business that turnover less.
This then changes from April 2020, where all businesses will be affected. On the 1st of April 2020, quarterly reporting is mandatoryfor income tax and corporate tax (as appropriate) for all business turning over £85,000. It will however still remain optional for businesses (including landlords) where their turnover is below the VAT registration threshold (£85,000).
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Planning for MTD
Each and every transaction your business participates in will require a digital record. This record must include the name of the business (or organisation), the address of the principle place of business, the VAT registration number and details of any VAT accounting schemes used. As well as this, when supplies are made, that record must also include the value of supply, the rate of VAT charged along with date and time of supply. Should there be multiple supplies subject to the same rate of VAT supplied at the same time these do not require individual records (think of it as goods on an invoice - you can have multiple goods on one invoice, as long as they are sold at the same time to the same customer). Conversely, if you supply multiple items at different VAT rates (e.g children's shoes and adult shoes) then you must split the invoice and create separate digital records. Is this something that your current software can do?
That is however not all. All of the digital records will have to be uploaded to HMRC via a Digital Link. In most cases a digital link refers to an API connection, which is a feed that allows two or more pieces of software to send data to one another. For example, transaction records and inventories can be sent via a feed from your EPoS system to your accounting system. Additionally, your online shop (for example e-commerce, Amazon or eBay) can also send transaction data to the same accounting software. Your accountancy software can then digitally communicate with HMRC's systems on a "real-time" basis, updating your VAT account and ending the annual tax return!
Why should I implement these changes?
These are the sort of provisions Making Tax Digital requires. Instead of manually updating separate systems, different parts of your business software need to be able to speak with each other. All of this has an added benefit - not only it keeps you compliant with MTD regulations, it also saves you time and eliminates errors. According to Sage, businesses could save around £17,000 per year by spending less time on manual administration, making fewer mistakes and having a greater oversight, transparency and more accurate financial data. Every year, around 700 000 businesses miss filing their tax returns on time; using digital accountancy platforms linked to your EPoS system appears to be reducing late submissions and the associated fines!
The key to a digital link is allowing systems to transfer the data free of any interference. In the initial rollout of Making Tax Digital, exporting and importing the data manually will be allowed. For the first year of implementation (VAT periods commencing between 1st April 2019 and 31 March 2020) businesses will not be required to have digital links between software programs. However, the submission of the VAT return must still be done via an API (using HMRC approved accounting software).
TESTIMONIALS: What ambitious retailers Are Saying about rms
"Our EPoS System was in need of a complete upgrade and we needed help with installation and data transfer of our existing RMS and NitroSell system.
Upgrading any system is often stressful and disruptive to both staff and the business. However RMS dealt with everything from the initial planning, loading the operating system on all the new hardware, transferring all the programs and data and completing an in depth system test. All this was done at the RMS Offices and away from our working environment, allowing our company to continue as normal.
Once the system had been installed and tested at RMS HQ, the hardware was shipped to ourselves and installed locally by RMS staff. The changeover was seamless and caused no interruptions with our day to day operations, with no down time as the installation was completed on a day when we are normally closed.
After care was exemplary, with RMS dealing with all software and actively monitoring our systems with their on-line monitoring service, in fact they have generally spotted and fixed any issue before we know it has occurred.
I can honestly say that RMS are, and always have been, the best EPoS IT company I have ever had the pleasure of working with. They have always delivered on time, within the initial quotes and often beyond expectation.
Having being with RMS for over six years we simply would not use anyone else."