It’s April, and you know what that means!
No, we’re not talking about Brexit. We’re talking about Making Tax Digital. Yes, after years of discussions and prep time, the deadline is here. If you’ve not got yourself sorted and ready, you’ve not got long to get organised and ready to submit your VAT returns digitally. If that sounds familiar, don’t worry – you’re not alone. We’ve come across plenty of business owners who aren’t ready yet, but there is still time to get your house in order. To help out, today, we’re answering some basic (and not so basic) FAQ’s around Making Tax Digital, so you can meet the deadline feeling fully prepared and in the know.
What Is Making Tax Digital?
Making Tax Digital is the name for the HMRC scheme designed to get all VAT registered businesses to submit their VAT returns online, instead of by paper. MTD has been in the making a while now, and just like Brexit, the deadline is fast approaching. The idea is simple – if you are a VAT registered business, with a turnover above the current VAT registration turnover threshold of £85,000, you now need to be using an online accounting system to track and manage your VAT. These online accounting systems can then link directly into HMRC’s digital platform, and you can upload VAT returns quickly and simply, once a quarter. You can find out more about what Making Tax Digital is by reading this blog.
Will I Be Affected?
If you run a business that is VAT registered or has a turnover above the VAT threshold of £85,000, then you will need to get on board with MTD. In essence, this means you will have to:
- Keep your records for VAT digitally
- Submit your VAT returns to HMRC via MTD approved software
Can I Opt In Even If I’m Not VAT Registered?
If your business is registered for VAT but earning below the VAT threshold, you have two options. You can continue as you are, or you can opt in to the MTD scheme straight away. If you choose to opt in, you have the security of knowing your software is compatible and you have all the systems you need in place ready for when you do have to join MTD, keeping you compliant from the outset and ready for the switch.
What Software Is Compatible?
Because businesses need to log their VAT returns digitally, they need to be using an accounting platform that is compatible with HMRC’s systems. In the beginning the list of HMRC approved software vendors was pretty small, but now as the deadline gets closer more and more platforms are getting accredited. The odds are if you’re using one of the major platforms (like Quickbooks, Xero, Sage, Freeagent, Kashflow or Clearbooks, you’re already using an accredited piece of software, so you don’t need to do anything. You can find a full list of approved accounting software here.
What Information Will I Need To Keep?
If this is your first time for VAT, then there are a few things you need to know. Essentially, you will need to keep a record of the sales and purchases your business makes so that any VAT outputs and inputs can be calculated for each return period (normally every quarter). These records need to include the transaction date and the rate of VAT that applies to the invoice in total. That means that your accounting software must be able to:
- Keep the required records in digital format
- Maintain and store the digital records for up to 6 years
- Produce a VAT return from the digital records
- Provide HMRC with the VAT return informational digitally
- Be able to receive information about the business compliance records digitally
If you’ve invested in an accounting platform that is MTD approved, then you will have all of these covered.
It might be the eleventh hour, but it’s not too late yet. You can still do everything you need to get ready for the MTD deadline – but you do need to act now. At Rosemary Bookkeeping, we can support you in choosing the right accounting system, train you on how to use it and even help you import all of your data, so you are ready to go when the deadline comes. From there, we can also support you with information, advice and ongoing support packages to help keep your business digital and running smoothly. To find out more, just contact your local Rosemary Bookkeeper today.
Written by Rosemary Bookkeeping Reading
