Despite there being no public news announcements from HMRC, like the TV advert about Auto-Enrolment with the 10ft furry monster, Making Tax Digital (MTD) for VAT is still going ahead from 1 April 2019.
MTD for VAT will affect almost all VAT registered businesses in some way, meaning there could be more work to do in preparation… Therefore, as the effective date for MTD is 7 months away, now would be a good time to start considering your options and make any transitions as painless as possible before April.
But the question is, how do you prepare for MTD?
1. Figure out when you need to switch to Making Tax Digital
Currently, it is not compulsory to submit your tax digitally, but the government has set a timeline for when it will be. Only businesses who have turnover above the VAT threshold (£85,000) will need to comply with MTD in April 2019, but this will then be rolled out to businesses below the threshold soon after.
The smaller VAT registered businesses will not be required to use the system, although they can do so voluntarily. They will, however, have to monitor their turnover levels on a rolling 12 month basis to ensure that they stay below the MTD threshold (£85,000).
Those businesses affected by MTD will have to keep digital records and submit VAT returns using software from the start of their first VAT return period beginning on or after 1 April 2019. If you are on the Annual accounting scheme or have special VAT account periods, these will continue to apply and the requirements will apply from the start of the first VAT return beginning on or after 1 April 2019.
2. Research your options
To avoid any potential complications, you will need to decide about your accounting software soon. These complications could arise from upgrading or migrating your software. Remember the use of technology is compulsory as set by HMRC!
It will be far easier to use online accounting software compared to desktop software as there are so many more features available. By making tax digital for businesses, HMRC requires you to submit returns online and it will be easier to use online accounting software.
Start assessing your online accounting software options now and make sure that you choose one that is easy to use and has the following features:
- Automatically calculates the tax you owe (including VAT and payroll tax).
- Pulls data straight from your bank, your invoicing software, or your Point-Of-Sale system.
- Updates your transactions every day, allowing you to stay on top of your finances.
- Creates digital records of paper receipts just by photographing them with your mobile phone.
3. Ask your accountant for advice about Making Tax Digital
By default, a business owner’s attention tends to be more about what it is they are selling and turnover and profit levels. Their focus does not tend to be if they are using systems to their full or if those systems are compliant.
When thinking about getting ready for Making Tax Digital, this is where Friend & Grant can really help. We can advise you on how and when to digitise your system when it is best for your business and ahead of the looming deadline. We’ll also identify the best software for your needs and walk you through how to take advantage of going digital.
4. Consider any training required ahead of April
If you are already using an online accounting system, or will be migrating to one ahead of MTD, it would be worth investing your time in a training package to ensure that both you and your staff get the best out of the system. These training packages are designed to ensure that transactions are entered correctly so that there are less errors in your records, making both your VAT returns and annual accounts compliance a breeze!
5. Embrace change
Change isn’t easy and if it involves adopting new technology, then it’s often ignored until the last minute. MTD is not as daunting as it seems, in fact, keeping digital records and filing VAT returns through software quarterly could reduce your workload! The good news for your business would be that you would be able to spot any opportunities and threats faster.
April may seem a long way away, but seven months can speed by. If you haven’t already, it’s worth researching your options. Cloud based accounting tools can help you automate invoices, reconcile transactions at a click of a button, manage your finances on the go and much more!
The content in this blog is correct as at 9th October 2018. See terms and conditions.