The biggest change to the UK business tax system since real time information is on the horizon, and around a quarter of small businesses haven’t heard of it.
Making Tax Digital (MTD) is a government initiative that aims to modernise the tax system by requiring businesses, the self-employed and some individuals to link their accounts directly with HMRC.
If your business is above the £85,000 VAT threshold, you’ll be affected by the first wave of changes.
As of April 2019, you’ll need to file your VAT returns directly with HMRC - no more typing numbers in manually.
In practice, this means that you’ll need to use ‘MTD-ready’ software to manage your VAT records and automatically generate and submit returns.
1.) Upgrade from paper
If you don’t keep your VAT records digitally, now’s the time to switch from paper to pixels - unless you have an online filing exemption. Every VAT record should be recorded digitally - you can’t just keep a daily/weekly summary figure digitally that you’ve calculated from paper records.
2.) Ditch the spreadsheet
You won’t be able to use your standard Microsoft Excel or Google Sheets spreadsheet to submit VAT information directly to HMRC. ‘Bridging software’ or extensions will be available to make spreadsheets compliant, we highly recommend switching from spreadsheets to accounting software.
3.) Speak to your accounting software provider
If you’re already using accounting software, get in touch with your software provider and ask them if they’re ready for Making Tax Digital. We are happy to confirm that we are HMRC’s list of Software suppliers supporting Making Tax Digital for VAT! This means that we have completed sandbox testing with the HMRC, you can’t get on the list without providing evidence of your solution and the HMRC accepting the solution.
4.) Get started ASAP
April 2019 may seem a long way off, but it’s in your interest to find a suitable software package as soon as possible. Instead of panicking about the impending MTD date, you’ll feel comfortable with your software’s features and the new legal requirements. Once everything’s set up, you’ll find other benefits to digitising your records, such as time savings and more accurate data.
5.) Train your staff
This extra time will give you the ability to educate your staff about MTD and MTD-compliant software. There will always be resistance to changing processes, but by getting staff onboard as soon as possible, complying with the new regulations will be far easier and less stressful.
The government will expand the MTD programme to cover other taxes once the VAT elements have proved successful. Even if your business isn’t above the VAT threshold, it’s worth familiarising yourself with MTD so that you’re better prepared when you do need to comply.
All of our software packages will be MTD-ready by April 2019. Contact us to learn more.