You’ve probably heard a lot about Making Tax Digital (MTD), but have you thought about how it will affect your business or the software you use?
MTD– What it all means
Making Tax digital is a key part of the governments proposal in transforming HM Revenue and Customs (HMRC) into a world-leading digital tax authority, whilst aiming to make it easier for individuals and businesses to get their tax right and keep on top of their financial affairs.
Here’s what the government say:
‘If you run a VAT-registered business with a taxable turnover above the VAT registration threshold (currently £85,000) you are required to keep digital VAT business records and send returns using Making Tax Digital (MTD)-compatible software. The vast majority of businesses will need to do this for VAT periods starting on or after 1 April 2019. Businesses with a taxable turnover below the VAT threshold can also sign up for MTD for VAT voluntarily.’
So how will this affect the software you use?
As MTD comes into play, you won’t be able to keep and submit manual records after April 2019. Instead, HMRC will only accept VAT returns sent using software that supports MTD. So now is good time to start thinking about your accounting software – that way you can avoid any potential complications or issues that may arise from upgrading your software during the financial year.
You will find it’s far easier to submit returns using online accounting software compared to traditional desktop software. If you still haven’t yet found the right software don’t panic, do your research and start to shop around to find the best fit for you and your business. A good place to start is the government website where they have listed all software that currently comply:
If you aren’t able to upgrade your accounting software to be MTD compliant then bridging software could be is the most efficient short-term solution. This could be for example an API enabled spreadsheet, (this basically means a link that connects your spreadsheet to HMRC’s systems) this should then allow you to report digitally. You can also use your tax adviser or accountant, who will be able to register you for MTD via an agent’s portal.
In summary, here are the key points to consider for MTD
- No more Annual Tax Returns – tax returns will be done quarterly. This is to make it easier for individuals and businesses to get their tax right and keep on top of their affairs.
- Starts April 2019 for businesses with a turnover which is above the VAT threshold, those that meet this criteria are required to keep digital records and submit quarterly.
- You will need to submit using software – so there has never been a better time to give your spreadsheets the boot, and take a look at upgrading to software that supports MTDs.
- There are a few exemptions from MTD, referred to as the ‘digitally excluded’. They include those who cannot engage digitally on the bases of age, religion, disability or remoteness of location.