Find out how MTD for eCommerce and other businesses in changing this April
With everything that’s going on in the world right now, April’s MTD changes for eCommerce and other businesses in the UK may have fallen under your radar.
However, with the soft-landing of April 2019 ceasing and additional responsibilities on eCommerce business owners commencing, it’s important that you take appropriate action to ensure compliance now.
MTD for eCommerce: a recap
Making Tax Digital (MTD) is a government initiative set to digitalise the way that tax is reported in the UK.
Last April, all VAT-registered businesses in the UK become required to keep sales records in a digital format and submit VAT returns via MTD-enabled software.
You can read more about last years changes in our guide to Making Tax Digital for eCommerce, including why we thought it was the push that eCommerce needed.
However, this was a soft-landing, giving eCommerce businesses time to adapt to the changes, before implementing MTD in full force this April.
MTD for eCommerce: a year on
So what’s happened in a year?
Studies have shown a positive impact following last April’s MTD changes, with small businesses generating more than £815 million in productivity gains, thanks to the time-saving benefits of tools such as Expandly and Xero for recording and transferring sales order information.
However, there is significantly more than can be done and achieved.
Only half of businesses feel confident about their understanding of MTD, and only a third went full-force and adopted digital software or services as a result of the changes – something that must change in the next couple of weeks.
MTD for eCommerce: April 2020’s changes
From 1 April 2020, the soft-landing period of MTD is over, with three additional requirements coming into full force. These are:
Digital bookkeeping
Sales data won’t be the only information required in digital format. Businesses will be required to digitalise records of all supplies received and made, alongside details of the time of supply, value and VAT. This includes information on purchases, stocks and fixed asset transactions.
Digital journey
The transfer of financial data between systems and software must be completed using digital links, with manual input, alteration, consolidation and copying and pasting expressly prohibited. This includes the transfer of sales order information from Amazon or eBay into Xero or your other accounting software.
Penalties
Finally, the suspension of penalties for late MTD filing is ending. Any penalties will be calculated on a cumulative basis, based on the number of offences in the past year. This can total 15% of the VAT due and fines of up to 100% of VAT undeclared as a result.
Other anticipated changes, including personal tax and corporation tax self-assessments, have not yet progressed – leading experts to conclude that these amendments will be mandated from 2021.
How will April’s changes affect eCommerce
eCommerce businesses large and small will be affected by April 2020’s MTD changes, in particular:
Small businesses who aren’t currently using accounting software will find the need to begin using it to help digitalise all sales and purchase information.
Larger businesses who are already using accounting software and systems will need to digitally link their sales channel(s) without manual input.
All businesses that consolidate sales invoices before posting to Xero or other accounting software to avoid soft transaction limits will need to have this task performed digitally.
How Expandly can help
Whether you’re an existing customer or not, Expandly can help you to comply with April’s MTD changes for eCommerce quickly and easily, while also saving you time and money in the process. How?
Digital record-keeping
Expandly holds all of your purchase and sales order information from channels including Amazon, eBay, Etsy, Wish, Shopify, WooCommerce, Magento and more.
Digital links
Expandly then digitally transfers this information to Xero, into the correct bank accounts, sales accounts and tracking categories depending on the channel and payment method used by your customers.
If you’re not a Xero customer, you can use Expandly to download your orders into a CSV compatible with Sage or other accounting software, ready for direct uploading to your chosen platform.
Digital consolidation
Expandly can also digitally consolidate (or batch) your sales orders, to help avoid soft transaction limits and group your orders in a meaningful way to assist with reconciliation.
Separate invoices are created per currency, sales channel and tax method (included, excluded and no tax), and within those invoices, there are separate lines per tracking category, tax rate and product.
Penalties
Ok, so we’re not offering to pay any penalties for you but the time saved by using Expandly to send sales orders to Xero from Amazon or any other sales channel(s) will give you more time to get on top of your eCommerce tax and finances. Expandly can be set up to transfer orders automatically, and the digitalisation of this information eliminates errors caused by manual entry or human memory.
Accounting
And, if this is all beyond you and strictly for your eCommerce accountant, we can give them access to Expandly too, saving them time and reducing your overall bill.
See for yourself with a live demo.
MTD for eCommerce: what to do now
Act fast. The changes come into force on 1 April 2020 for VAT periods that started on 1 April 2019, and 1 October 2020 for VAT periods that started on 1 October 2020.
You can read the full brief on MTD from HMRC here.
About Expandly
Expandly multi-channel eCommerce software seamlessly integrates your online marketplaces and eCommerce platform with Xero – helping you to become MTD-compliant for VAT purposes.
Simply enter in your sale channel and Xero credentials, confirm your preferences and sit back while Expandly automatically sends your sales invoices into Xero for you.
Expandly also partners with eCommerce accountants to give them quick access to your sales channel data for fast processing of your finances and tax return.