Making Tax Digital, or MTD, is part of a wider plan by HMRC to transform the way it handles its relationship with taxpayers by using technology.
In time this will cover most taxes, however to begin with it will focus on VAT.
MTD for VAT: In a nutshell
From 1 April 2019, all VAT-registered UK businesses above the £85,000 VAT threshold will need to keep records digitally and submit VAT returns to HMRC using MTD-compatible software. This means you will no longer be able to submit VAT returns through the government gateway by manually filling in the boxes.
If you currently don’t use any software to record your transactions, you will need to do so, and well before the start date in April.
If you are using cloud based software then you are more likely to be MTD ready right now. Clients using our preferred supplier Xero, are in safe hands, and the only change you are likely to need to make is to file your VAT return via the software and not the gateway.
However, not all software will be ready for MTD without purchasing additional upgrades, or organising significant development work. This is likely to be the case if you are using desktop products, spreadsheets or a bespoke system.
Spreadsheets will be allowed under MTD to record your bookkeeping transactions, however there are some important restrictions. The major one is that you will need to purchase and use ‘Bridging software’ that will connect from your spreadsheet to HMRC in order to file each quarter. As there is an additional cost here, our advice is to consider moving to cloud software in order to remain more fully compliant and gain the wider benefits of being online.
It is not understood how long into the future spreadsheets will remain compatible for MTD.
No change to your VAT scheme
On the whole MTD is around changing the way businesses record their transactions and the processes around reporting to HMRC. There are no changes as such to the VAT schemes themselves.
There are some areas however where this change in process will impact: for example if you are a retailer and record transaction totals weekly, this will have to be done on daily basis.
Benefits of the cloud
Taking the opportunity to move to modern cloud software, like Xero, can bring significant benefits to your business, as well as ensuring you will be compliant.
- Work collaboratively with your Relationship Manager, without sending backups
- Benefit from ‘live data’ such as pulling in your bank transactions for easy reconciliation
- Automatic upgrades, and no need for extra backups offsite
- Work anywhere and on any internet enabled device
- Benefit from a huge range of add-on software such as managing expenses, stock or cash flow forecasting
Helping our clients be fully MTD ready
Over the coming months we will help you understand how MTD will impact you and what action you may need to take to become MTD ready. We will do this by:
- Sending you emails to let you know if you are impacted and how
- Inviting you to webinars where you can learn more, and understand the options
- Encouraging you to contact your local Partner or Relationship Manager to discuss
As award winning financial technology experts, we are here to ensure that you receive the support you need, and have solutions available for even the most complex requirements through our relationship with external professionals.
Of course if you would prefer, please do contact your Partner or Relationship Manager today.
Not yet a client, but would like to know more?
Please contact us today to find out how taylorcocks can ensure you are MTD compliant and register interest in attending one of our upcoming webinars.