Making Tax Digital or MTD is a new initiative by HM Revenue & Customs (HMRC) to make it easier for businesses to get their tax right with a clear and accurate audit trail.
The new digital process is designed to create a simpler and error-free process tax system. Once fully implemented MTD will affect all businesses so it’s important to understand how this will affect you and what you need to do to prepare for it.
Who Will Be Affected By MTD?
From 1 April 2019, VAT registered businesses with a turnover above the £85k VAT threshold will no longer be able to submit their VAT returns through the HMRC’s Government Gateway site.
Instead they will be required to submit their VAT returns using a third party, MTD compatible software.
By April 2020, all remaining VAT registered businesses (either voluntary registered or with a turnover below the £85k VAT threshold) will also be required to submit their returns via compatible software.
Preparing for MTD
The first thing you need to consider is whether your business will be affected by the April 2019 deadline or the April 2020 deadline. If you know that you will be affected by the April 2019 deadline, you need to ensure you’ll be ready to comply.
If your business is approaching the VAT threshold or if your business is new and growing, we recommend that you either seek advice from an accountant or forecast your income to see if you will qualify. Taking a proactive approach will help you to understand the potential future impact MTD will have on your business.
MTD Accounting Software
If you already use accounting software such as Oracle or Sage X3, the process might be relatively simple. Check with your ERP provider for compatibility and take advantage of any possible feature updates that might be available.
If your current software is either outdated or incompatible with MTD, you will need to upgrade or find a new software provider that is MTD ready and will also work with your business needs.
If you use manual records or spreadsheets to prepare and submit your VAT returns, you will need to replace your existing process with a software driven approach.
MTD for VAT Deadline
If you’re looking to upgrade or implement accounting software, now is the time to do it.
The April 2019 MTD deadline is only a matter of months away which doesn’t leave much of a lead time for planning, installation or training.
The volume of businesses around the UK adopting MTD for VAT is substantial, which means that software vendors, accountants and the HMRC are all going to be inundated with support calls.
Switching your accounting process to being MTD compliant now, could help you to avoid that last minute deadline rush.
If you’d like to know more about Making Tax Digital or how Percipient can help you to prepare, get in touch or call us on 01606 871332.