From April 2019, new legislation “Making Tax Digital for VAT” (or MTD, as it’s often referred to) will come into force. This is part of a wider strategy for HMRC to digitalise taxes for all businesses and landlords.
The legislation requires that all VAT registered businesses with turnover above the VAT registration threshold (£85,000) will need to maintain digital accounting records and submit their VAT returns electronically through the accounting software/system that contains those records.
What it means for you
If you’re a business who currently uses software to maintain all of your accounting data, and submit your VAT return directly through the software, then it’s likely you’re already compliant. For peace of mind, just give us a quick call to check and then you can hopefully carry on, as you are, if you wish.
If you’re a business who either doesn’t use software at all, or who use software but then manually prepare your VAT return through HMRC’s Online Services, for example, then you will need to take action.
What should you do next?
The first thing to do is assess your current software and accounting processes, to see if you are already compliant.
If you’re not compliant, then the next stage is to plan what changes you need to make. This may be as simple as upgrading your existing software to the latest version, or for many, it will mean setting up a completely new accounting software system and processes.
Don’t worry, we can help with all of this and it’s not as scary or expensive as it might sound.
When do I need to act?
Our view is simple – the sooner you take action the better! The businesses who need to be taking the most urgent action are those whose financial year end is June 2018, followed by July 2018 year ends and so on.
Even those businesses who have a March year end – meaning they don’t need to transition to new software until 1 April 2019 at the latest – should have a plan in place well before the deadline.
An opportunity for positive changes
The introduction of MTD is the perfect opportunity to completely transform and revolutionise the way you do business and the way you maintain your accounting records. Cloud Software such as Xero and Sage One allow you to raise invoices on the go, get paid faster, keep track of the profitability of different projects, and market to new and existing customers – from anywhere in the world.
It speeds up every process – from raising an invoice, to reconciling your bank account, right through to getting your end of year accounts produced.
And, it means you can eventually do away with all those pieces of paper that have been taking up valuable space!