It’s March, and you know what that means! No, we’re not talking about the constantly evolving Brexit (which seems to be in a bit of Schrodinger situation right now, where it both is and isn’t happening in a few weeks). No, we’re talking about Making Tax Digital of course! After many years of discussion and months of preparation, the deadline is nearly upon us. Soon, every VAT registered UK business will see a significant shift in the way their VAT is calculated and submitted. In case you haven’t quite got all your ducks in a row yet, we have some last minute info to help you out.
What Is MTD?
The MTDfb (making tax digital for business) initiative means that from the 1st of April 2019, any VAT registered business earning above the threshold of £85k will be required to keep digital records, and submit VAT returns using a compatible piece of software. This means that they won’t be allowed to keep manual records (as opposed to just being advised not to), and submit their VAT returns through HMRC’s API platform (instead of entering the information manually into HMRC’s portal). But this isn’t going to be a hard changeover. There will be a ‘soft landing’ for 1 year after launch, which will allow businesses to keep submitting their returns in the old format as they get ready for the changes. To can find out more about what MTD is by reading our previous blog.
Who Will MTD Affect?
Essentially, MTD will affect any business that is VAT registered. If you’re earning above the threshold of £85,000 annual turnover, then you need to be paying attention. This means you will have to:
- Keep your records for VAT digitally
- Submit your VAT returns to HMRC via MTD approved software
What Software is Compatible?
Because businesses need to log their Vat returns digitally, they need to be using an accounting platform that is compatible with HMRC’s systems. In the beginning the list of HMRC approved software vendors was pretty small, but now as the deadline gets closer more and more platforms are getting accredited. The odds are if you’re using one of the major platforms (like Quickbooks, Xero, Sage or Clearbooks, you’re already using an accredited piece of software, so you don’t need to do anything. You can find a full list of approved accounting software here.
Do I Need To Keep Anything?
Yes. As part of the MTD scheme, you will need to keep any receipts that you have paid VAT on, as well as any invoices you have charged VAT on. This information will help you calculate the right amount of VAT per quarter, and submit an accurate return. Where this used to be done by hand, your accounting software will now have to be able to do this, and store the information for your records. In essence, your accounting software needs to be able to:
- Keep the required records in digital format
- Maintain and store the digital records for up to 6 years
- Produce a VAT return from the digital records
- Provide HMRC with the VAT return informational digitally
- Be able to receive information about the business compliance records digitally
If you’ve invested in an accounting platform that is MTD approved, then you will have all of these covered.
At Cove Accountancy Services, we work with a lot of businesses who work with manual accounts and bookkeeping records. Trades in particular are pretty susceptible to this, and so the next year will be a big transition. We can help businesses like this understand the new changes to VAT and digital tax, and move their systems into the digital age, ready for April 1st. for more information about Making Tax Digital, or to find out how we can help you get ready, just get in touch with the team today.