With Making Tax Digital (MTD) coming into effect in April of this year (2019), there are some key preparations that your business will need to make quite soon if your turnover exceeds the VAT threshold of £85,000.
You’ve probably heard a lot of rumours as to what MTD really means, so we wanted to shed some light on those rumours and cut through the claims to let you know exactly what MTD means for your business.
Ultimately, the aim of MTD is to make tax administration more efficient and simpler for tax payers, according to HMRC. In theory, once all elements of the tax system are included, there should be no requirement for tax returns moving forward, as information will already be loaded to your Digital Tax Account.
It is fair to say however, that at the moment, many of our clients are seeing MTD as yet another burden on their small business, rather than a simplification!
This April sees the introduction of the first phase, MTD for VAT. This will require all businesses with turnover above the VAT threshold to file their VAT under MTD requirements, unless they fall under the ‘complex business’ concession that has been introduced. Those that are considered ‘complex’ have a further 6 months to prepare.
The submission will require all businesses to have MTD compatible software. Many of the cloud systems are ready to go, such as Xero, QuickBooks and Sage Business Cloud, and more are in development. A full and up to date list of all compatible software can be found here.
MTD does not require you to keep any additional records, but does require them to be recorded digitally. These records should include (for each supply):
- Tax point/time of supply
- The value of the supply (net excluding VAT); and
- The rate of VAT charged
This will mean that any business not running suitable software may need to find a bridging solution, or move across to another option.
If you are not using compatible software, please get in touch. We can go through the various options available to you, to ensure MTD compliance.
Here are the key dates for your MTD diary. Check when you need to have digital processes in place.
April 2019 Non-complex, VAT registered businesses with a turnover over £85,000
October 2019 Complex VAT registered businesses (such as VAT groups and non-company charities)
April 2020 VAT registered businesses with a turnover under £85,000
If you are unsure how MTD will affect your business, or have any questions, please don’t hesitate to get in touch.
Written by Liz Newell