Making Tax Digital (“MTD”) is a hot topic right now – people want to know what MTD is and whether they are affected. I usually reply with two questions; are you VAT registered and is your turnover over £85,000?
If the answer to both questions is “yes” then you will need to comply with MTD from April 2019. If the answer to either question is “no” then you can breathe a sigh of relief (for now!).
From April 2019, most VAT registered businesses with turnover above £85,000 will need to be MTD compliant.
So what does this mean?
To comply with MTD you will (in most cases) be required to keep accounting records digitally using computer software that can communicate directly with HMRC via a digital link. VAT returns will need to be filed by clicking a button in your own accounting software, rather than by the current method of typing the numbers into HMRC’s online gateway.
What should you be doing now?
If you already use accounting software, you may already be MTD compliant, but you should check with your provider. Most cloud accounting packages will be ready but desktop software may need to be upgraded.
There’s good news for spreadsheet users. Spreadsheets, such as Excel, will count as digital records, but they will need ‘bridging’ software to communicate with HMRC. We do have a solution for this to ensure that our clients using spreadsheets can continue to do so.
However, this might be a good time to review record keeping as there are benefits to accounting software. They can make record keeping more efficient and provide a clearer picture of your business throughout the year.
If you are using manual records (e.g. a handwritten book) then action is needed to comply with MTD. I do have clients in this position, fortunately there are plenty of options. These range from embracing accounting software right through to simply passing all of the paperwork to an accountant. We take care of all of the record keeping for many of our clients.
My final piece of advice is to prepare for MTD as soon as possible!