Are you ready for Making Tax Digital?
Article posted: 5th September 2018
With just seven months to go before Making Tax Digital (MTD) comes in for VAT, there are critical steps that businesses should be taking to ensure they are ready for the April 2019 deadline.
As part of MTD, VAT-registered businesses with a taxable turnover above the registration threshold of £85,000 will need to keep VAT records digitally and file their VAT returns using MTD compatible software. This will apply from their first VAT period starting on or after 1 April 2019. After this time, it will no longer be possible to submit VAT returns via the HMRC Gateway. Instead, third-party software will be required to comply with the regulations.
Businesses with a taxable turnover below the VAT threshold will not have to operate MTD but can still choose to do so voluntarily. MTD for income tax and corporation tax purposes is still in the pipeline and will not be implemented before April 2020 at the earliest.
We have identified two categories of businesses that need to take specific action to become compliant with MTD for VAT:
- VAT-registered businesses above the £85k not using online accounting software
- VAT-registered businesses using Sage desktop
Taking each in turn:
VAT-registered businesses not using online accounting software...
...have a big decision to make around choosing a compliant online software package and getting staff trained and using the new system before the April deadline comes in.
Such businesses will need to think about the key reasons for using their existing software and consider the benefits of moving to a cloud-based supplier in future. These often include saving time and money, as well as providing up-to-date account information which means smarter, more productive businesses with decisions made on real-time management information.
Approached in this way, moving to a new MTD compliant accounting software can provide businesses with additional benefits to improve their finance function.
VAT-registered businesses using Sage desktop software...
...will need to take urgent action as they will no longer be able to file their VAT returns with HMRC directly through the software. Instead, an upgrade is required to either a subscription basis or by buying a new ‘MTD Subscription’ module add-on. To help with the transition, Sage is offering discounts to businesses signing up to its monthly subscription package.
However, there are also opportunities for non-VAT-registered businesses looking to change their accounting software. Such businesses should use the MTD VAT deadline as an opportunity to modernise their finance function and take the same approach as businesses not using online accounting software outlined in (1) above.
The benefits of moving to an MTD-compliant software are obvious but there are real opportunities to develop a strategic advantage over the competition by reviewing software needs, assessing products on the market and choosing a product that helps to transform the time, money and effort spent on accounting and compliance procedures.
Whichever type of business you manage, by preparing for digitised VAT accounting now you will be in a stronger position to cope with the further MTD initiatives as they are implemented later down the line.
For any questions on Making Tax Digital, please contact Matt Reid in our tax team on email@example.com or 020 8309 0011.
If you need help making your decision about which package to choose please read our factsheet ‘Evolving your accounts system and moving to the Cloud’. You can also contact Andy Fuller on firstname.lastname@example.org or 020 8309 0011.
Back to blog listing
Other Articles by Matt Reid
Will the forthcoming Budget tighten IR35 rules?
Referees show HMRC a red card
Online marketplaces to assist HMRC on trader VAT compliance