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It’s high on the radar as we’ve entered 2019, and if you’re a business owner, you’re probably aware of the hot topic that’s right in the forefront of both businesses and accountant’s minds: Making Tax Digital.
Making Tax Digital (MTD) is a HMRC initiative designed to make sure the UK tax system is effective, efficient and easier for taxpayers.
Making Tax Digital begins on 1 April 2019 with MTD for VAT. This means that from date, VAT-registered businesses above the threshold of £85k will have to keep digital records and submit VAT returns using compatible software. Further on from this date, there will be other components to Making Tax Digital, which will include income tax and corporation tax, and all other businesses but this won’t be until April 2020 at the earliest.VAT registered businesses above the VAT threshold will be affected from 1st April 2019. These businesses already have to report and pay any VAT due quarterly, so the main change is the requirement for these records to be stored digitally and sent to HMRC using MTD compliant software.
If you are over the £85,000 threshold, this is for you - and you only have until 1st April 2019 to comply. After this date, all VAT-registered businesses will need to store and submit their records digitally.
Despite all the hype, MTD is not as scary as it sounds and if you are already organised and up to date with your accounts, you’ll be fine! The main thing you (or your accountant) need to do is make sure you are using an online software programme that is MTD-compatible.
As there are current penalties for VAT, there will also be penalties if you MTD for VAT. You can check them out here. However, during the ‘soft landing’ period of April 2019 and 1st April 2020, there won’t be any penalties for not complying with the new MTD for VAT rules.
It has been increasingly common for business records to be kept in digital format, on a computer, on a table or mobile device, in a cloud-based program, businesses are used to working in this way. Therefore, MTD should not be a shock to the majority of businesses, it will just be a matter of using a software programme that complies with HMRC requirements.
Anyone that has an accounting year that doesn’t tie in with the tax year will need to think about switching to a compatible digital system as soon as possible, ready for when you have to submit your returns. The last thing you want to do is have to change software part-way through your accounts year - it’s a tedious task!
Also, you’ll need to bear in mind that if you currently submit returns directly to the HMRC website, this will no longer be an option and you’ll need to find compatible software.
Remember, Making Tax Digital for VAT is intended to make the UK tax system more effective and efficient.
If you’re working with an accountant, they should already be on the case for you, ensuring that you are compliant with Making Tax Digital. 2020 Accountancy will manage this for you, so our current clients are covered when it comes to being compliant.If you’re a contractor or small business owner who's still unsure on how to proceed with MTD, please get in touch and we will be happy to direct you to what you need to do or offer our services to ensure compliance. We look forward to hearing from you!
