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Making Tax Digital

Everything you need to know about Making Tax Digital

Q. What is Making Tax Digital?
A. Making Tax Digital (MTD) for VAT is a new HMRC scheme to eliminate paper-based processes by moving to digital VAT record keeping and digital VAT return submissions using MTD-compatible software.
 
MTD is a key part of the government’s plans to make it easier for businesses to get their tax right and keep on top of their tax affairs. HMRC’s ambition is to be one of the most digitally advanced tax administrations in the world, modernising the tax system to make it more effective, more efficient and more accurate.
 
Compatible software is a product that supports the MTD obligations of keeping digital records and exchanging data digitally with HMRC through the MTD service.
 
Q. When did Making Tax Digital start? And who does Making Tax Digital apply to?
A. MTD for VAT became mandatory for all VAT-registered businesses with a taxable turnover above the VAT threshold of £85,000 from the end of the first VAT quarter after 1st April 2019. The only exception is a minority of businesses with more complex requirements for which HMRC deferred mandation to 1st October 2019.
 
What’s more, From April 2020, data must be exchanged digitally between all software used by a business for VAT. This information will be the 9 boxes required for VAT returns. This includes law firms and MTD is a new accounting obligation over-and-above existing SRA Accounts Rules, CLC Accounts Code or Scottish Accounts Rules requirements.
 
Q. What does MTD mean for accountants?
A. Accountancy practices who prepare and send VAT returns for law firm clients need to comply with MTD for VAT. A licence to access each client’s MTD-compatible legal accounting system with easy-to-use MTD screens and accountant-centric reports, such as Quill’s, make this task possible.
 
Q. How do law firms register for MTD?
A. Go to https://www.gov.uk/guidance/sign-up-for-making-tax-digital-for-vat and sign up your business using your Government Gateway user ID and password. If you don’t yet have one, create it when you register.
 
Additional details will be required for sign up including your MTD-compatible software, VAT registration number and data from your last VAT return. Make sure you give yourself plenty of time to enrol before your next VAT quarter is due.
 
Q. Which MTD software should I use?
A. Whilst spreadsheets can be used to keep digital accounts records for many businesses, these spreadsheets must be able to submit the necessary data digitally to HMRC. Summary data must not be physically re-typed into another software package for this purpose.
 
Law firms tend to subscribe to dedicated, industry-specific legal accounting software in order to adhere to the stringent demands of solicitors’ accounts rules. This software must now be MTD-compatible in order to digitally send HMRC your quarterly VAT returns and receive information back electronically from HMRC.
 
A range of commercial software developers, Quill included, have successfully completed an Application Programming Interface (API) initiative to integrate their accounting software fully with HMRC’s systems thereby allowing them to exchange data.
 
Where Quill’s concerned, we created an MTD roadmap and through a concerted software development effort, made it onto HMRC’s list of MTD-compatible suppliers in time for deadline. The full list of MTD-compatible suppliers can be found at https://www.tax.service.gov.uk/making-tax-digital-software.
 
Q. Is Quill’s Interactive legal accounting software MTD compatible?
A. Yes, having completed an extensive development and testing programme with HMRC, Interactive has an API with HMRC for MTD. Our MTD for VAT module is available as part of your standard Interactive Cloud licence. On top of existing functionality where you keep detailed digital records of all sales and purchases for VAT purposes, you can prepare and submit VAT returns straight to HMRC, and view current and past VAT returns from one handy screen.
 
Here’s what you need to do in order to begin using Interactive for MTD:-
 
1. Check your VAT number
 
Ensure your VAT number for your business is entered in Interactive and is correct.
 
2. Check your VAT quarters
 
Make sure that your VAT quarter details entered into Interactive Accounts match your actual quarters held by HMRC.
 
3. Assign roles
 
VAT submissions can only be made using Interactive Cloud. The new functionality introduces four new authorisation ‘roles’. These roles are:-
Each individual in your practice allowed to fulfil one of these roles must have their own unique and valid Interactive licence. Most staff in your practice will already have a licence but if the relevant staff don't have a valid licence, please contact us at MTD@quill.co.uk. For clients using our Pinpoint outsourced cashiering service, you'll only need to check if you have a licence so you can fulfil the role to ‘authorise a submission to be made’. The other roles will be filled by your cashier or cashiering supervisor (more on this below).
 
From your list of licensed users, you'll need to decide who should be authorised to fulfil each of these roles ie ‘view and prepare’, ‘make manual adjustments and send for internal approval’, ‘authorise a submission to be made’ and ‘make submissions’. This might be the same or a different person depending on your own internal procedures.
 
Please email MTD@quill.co.uk with:-
4. Ask for help if you need it!
 
For any specific assistance for MTD, please do get in touch with us by emailing support@quill.co.uk.
 
Q. What other functionality is available within Interactive?
A. As a complete practice management system, Interactive contains intuitive features for case management to drive matters onwards from initial inception to successful conclusion, and document management for deep integration with Word and Outlook. A powerful reporting engine gives you access to ready-made and bespoke reports populated with real time data. A range of optional extras – police station app, AML checking, SMS messaging and postcode search facility amongst them – bring even more time saving, efficiency enhancing and risk reducing benefits.
 
Q. Can Quill act as our ‘agent’ for MTD?
A. Yes. If you subscribe to our Pinpoint outsourced cashiering service, Quill can register as your authorised agent so your legal cashier can submit VAT returns on your behalf. By doing so, Quill can provide complete end-to-end accounting support with absolute compliance assurance.
 
You’ll need to nominate someone in your practice to authorise your VAT returns to be submitted. Your Quill cashier and supervisor will fulfil all other roles, these being ‘view and prepare’, ‘make manual adjustments and send for internal approval’ and ‘make submissions’.
 
Read how Quill’s acting as the MTD agent for Russell & Co Solicitors at https://www.quill.co.uk/case-studies/743-russell-co-complies-to-making-tax-digital-reform-with-help-from-quill.
 
Q. How does the Pinpoint cashiering service work?
A. You simply record your solicitors’ fee earning activities and disbursements, and send daily e-chits of inbound and outbound monies, and your assigned cashier does all the rest. When your cashier’s absent, your named deputy steps in so you enjoy continuous cashier support. With a supervisor monitoring completed tasks for accuracy, speed, volume and consistency, you can be confident in spot-on, on-time bookkeeping.
 
Q. How much will I pay for MTD compatible Interactive and Pinpoint?
A. Your monthly fee will be determined by the number of users (Interactive) and actual transaction volumes (Pinpoint). A tailored quotation can be provided upon request. Email info@quill.co.uk to ask for pricing.
 
Q. Are there penalties for getting MTD wrong?
A. During the first year of MTD mandation, HMRC is taking a light touch approach to penalties by not issuing filing or record keeping penalties where businesses are doing their best to comply with MTD. However, sanctions will be possible in cases of deliberate non compliance.
 
Q. Are deadlines changing?
A. The existing deadlines for sending VAT returns and making payments are not changing, including for monthly, quarterly and annual VAT return schemes.