To the thousands of business owners in the UK who submit their own VAT returns – get ready for the impact of Making Tax Digital.
Making Tax Digital becomes mandatory on Monday 1 April. It will affect everyone who submits their own returns, so that’s accountants in practice, accountants in business and VAT-registered business owners.
HMRC has claimed digital tax returns will help reduce an £8bn tax gap resulting from avoidable administrative errors. Ahead of the switch, MTDfVAT has produced five top tips on how to best prepare for this revolutionary change within HMRC. It guides smaller businesses on how to get ready and prepare for 1 April 2019. We highlight some key points to consider.
There has been quite a lot of information regarding Making Tax Digital. What we aim to do is make this information more relevant to small business owners like you.
Why the change in the first place?
HMRC feels that Making Tax Digital is a vital part of the government’s plans to make it easier for individuals and businesses to get their tax right and keep on top of their affairs.
HMRC’s ambition is to become one of the most digitally advanced tax administrations in the world. Making Tax Digital is making fundamental changes to the way the tax system works – transforming tax administration so that it is:
- More effective
- More efficient
- Easier for taxpayers to get their tax right
How are they going to do this?
Well, HMRC is going to restrict the current gateway for those who are mandated.
VAT-registered businesses with a taxable turnover above the £85,000 VAT threshold are required to use the Making Tax Digital service to keep records digitally and use software (like MTDfVAT) to submit their VAT returns from 1 April 2019.
The exception to this is a small minority of VAT-registered businesses with more complex requirements. These specific exceptions are listed below:
They will not be able to take part in the pilot now if they:
- are part of a VAT Division
- are based overseas
- are a trust
- are a not for profit organisation that is not set up as a company
- submit annual returns
- make VAT payments on account
As part of planning for the VAT pilot, HMRC continued to engage with stakeholders and listen to their concerns about business readiness for Making Tax Digital. HMRC has decided to delay mandation for these customers until 1 October 2019 to ensure there is enough time to test the service with them in the pilot before they are mandated to join.
Five top tips to help your business get ready for Making Tax Digital (MTD)
Knowledge is power
Make sure that you keep up to date with the process of MTD. It’s not a complicated one to explain, but it can be daunting at first if you don’t know about anything about it.
Register as a client
As a business, you need to set up a Client Services account to be able to register and set yourself up. Once you are signed up to HMRC’s pilot, as you will become more familiar with the process. You can sign up here.
If you are already holding your data digitally
As a business you may be keeping your information in a spreadsheet or hold digitally elsewhere – this doesn’t mean that you are already MTD compliant. You need to invest in software that is approved by HMRC to ensure that you are compliant.
Pick the right software
Bookkeeping is a vital part of your accounting process. If you don’t want to move away from spreadsheets – that’s fine. Invest in Bridging Accounting software like MTDfVAT for businesses and individuals with a single vat number. These solutions allow you and businesses to maintain their current way of working and they are still able to become MTD Compliant, as HMRC has approved MTDfVAT.
Once you are registered for MTD, there is no going back or reverting to the old HMRC gateway.
MTD is here to stay – and it’s easy
Once you get set up, the rest is plain sailing. Sending information to HMRC will become very easy and stress-free.
MTDfVAT can be purchased as a standalone product for £50 (+VAT) for an annual license. Taking just a matter of minutes to set up, it comes with unlimited free email support from our friendly UK-based team. MTDfVAT is available to buy and is approved by HMRC. Visit www.mtdfvat.co.uk for more information.
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