There always seems to be a new piece of of regulation that businesses have to grapple with. Now we’re over GDPR (or not, if my inbox is anything to go by!) we have had confirmation from HMRC that their ‘Making Tax Digital’ (MTD) project is finally starting.
The ultimate goal of MTD is to make HMRC “one of the most digitally advanced tax administrations in the world”. If it all goes to plan it will mean that businesses and individuals could be submitting quarterly information to HMRC for corporation tax, self assessment and VAT in a few years’ time.
We’re now only at Stage One of MTD, so at the moment the only tax that is going to be impacted is VAT.
If you are a business with sales in excess of £85,000 you will have to comply with the new MTD VAT regulations from April 2019. In a nutshell, this requires businesses to do two things:
1. Submit VAT returns to HMRC through ‘compliant software’; and
2. Keep almost all of your accounting records on ‘compliant software’.
So from April 2019 there will be no more submitting returns via the HMRC website. And to make things a little more confusing ‘compliant software’ does not have to be one piece of software, it can be numerous bits of software that are ‘linked’.
Are you compliant yet?
HMRC have said around that only half of the companies that will need to comply currently have their records in the correct format. So that’s a lot of companies with work to do in the next 8 months!
The Making Tax Digital VAT notice published in July is over 6,000 words long, so working out if you are going to be compliant or not is no simple task. Businesses should speak to an accountant to get a clear picture however if either of the following apply, your current processes will need to change come April 2019:
1. You currently submit VAT returns through the HMRC website; or
2. You do not currently keep your records up to date in a digital format.
The benefits of going digital
If you are not compliant yet, don’t worry! There is plenty of time to get ready and there is a silver lining: most businesses can reap some fantastic rewards by going digital.
There has been a huge leap forward in business software in the last 5 years, driven by cloud based packages (e.g. Xero, Quickbooks). Some of the most common benefits business owners can enjoy from going digital are:
Less time spent on admin thanks to automation of mundane tasks
Reduction in errors as less manual input
Ability to easily and cheaply accept credit card payments or set up direct debits
Secure, up to date information wherever you are; and
Increased clarity on business performance with improved reporting
So if you do have to make a change to be MTD compliant, make it a positive change. Investigate and put in a system that will improve your business. There are thousand of business apps which support cloud accounting so the benefits to your business could be huge.
If you’re not sure where to begin, speak to your accountant about how to get up to speed or please feel free to contact us at Monty Accounting.
Charlotte & Tim
Monty Accounting Solutions
Monty Accounting Solutions are accountants based in Hungerford, specialising in cloud accounting