Making Tax Digital for VAT - the facts
Making Tax Digital has been discussed and debated with the original timetable being deferred and scaled back. Here we seek to provide you with the facts as we know them today, and how we can help you comply.
What is Making Tax Digital?
Making Tax Digital (MTD) is, quite simply, the name given to the government’s drive to ‘digitise’ various tax compliance processes. Eventually, MTD will require most businesses to file certain income tax and corporation tax data digitally on a quarterly basis, as well as filing their VAT return digitally. The overall aim for the government is to increase efficiency with the inevitable cost savings. A logical move.
This is a huge undertaking as it will affect individuals and businesses of all shapes and sizes.
As a result, the government are phasing implementation, with the first group to be affected from April 2019 being VAT registered businesses (including landlords) that have turnover over the VAT threshold (currently £85,000). A recent relaxation means that trusts, unincorporated ‘not for profit’ organisations, VAT divisions, VAT groups, traders based overseas, those in payments on account or annual accounting, PLC’s, and certain public sector entities will not have to comply until October.
My VAT turnover exceeds £85,000 what do I need to do?
As from 1 April 2019, you must store your accounting records in a digital format and use this information to complete your VAT returns digitally.
How do I store this information and submit my VAT returns?
HMRC are not themselves providing software to assist. Therefore, if you don’t use MTD compatible accounting software, you will need to take action.
Most businesses will probably choose to use MTD compatible accounting software, such as Quickbooks online, Sage 50/200c, Sage Business Cloud, Xero or others, but would need to have the most recent versions of this software to file digitally.
The right accounting software has many other benefits besides enabling you to be MTD compliant. There are huge opportunities for labour saving as well as easier data/work sharing and collaboration. It is important to make sure you are choosing the right package for your business as not all packages are the same. Ensors can help you make the right choice for your business, and we can offer you a permanent discount on your subscription for cloud accounting software from Quickbooks, Sage or Xero if you subscribe through us. Please visit our Ensors.digital page to find out more.
If you already use accounting software speak to your supplier to ensure that it will be MTD compliant come 1 April 2019.
However, other businesses might have good reasons not to adopt MTD compatible accounting software or might wish to use spreadsheets for their accounting records; either is accepted by HMRC as “digital records”, but you will still need a method to file VAT returns digitally. However, paper records will no longer be acceptable.
I don’t want to adopt MTD compliant accounting software what do I need to do?
Adopting such software may be impractical for you because you are:
- using bespoke or legacy software with no option of MTD compatibility;
unable to upgrade your software due to its integration with other systems and, as a result, you cannot upgrade to ensure MTD compatibility; or
- currently using a spreadsheet for your accounting and it’s not cost effective or practical to change to an accounting package.
In these circumstances you can file your VAT returns through commercially available MTD for VAT “bridging software”. There are myriad software tools out there, but Ensors can help, and we have two options:-
Ensors VAT submission service
You can let us take the strain and we will do everything for you. We will provide you with access to our new, secure portal, OneClick. This will enable you to securely send us your VAT spreadsheet and we will then ensure a timely submission of your VAT return to HMRC, at a charge of £40 + VAT per submission. For an additional fee we can also provide a full VAT review thus ensuring data accuracy prior to submission.
VAT filing software
Alternatively, if you prefer to make the submissions yourself then we have teamed up with leading cloud accounting software provider Quickbooks to provide you with direct access to their new Making Tax Digital filing software at a cost of £10 + VAT per month. This will allow you to continue to use spreadsheets as it will provide a digital bridging link from your own VAT spreadsheet through to HMRC to enable the VAT submission to be filed directly.
If you would like to find out more please send us a quick enquiry and someone will contact you to discuss in more detail.
What if I just don’t want the hassle?
You may prefer to hand all of your bookkeeping and VAT work over to us to complete, and with modern systems this might be more cost effective than you think. Send us a quick enquiry to find out more.
My turnover is below £85,000, do I need to do anything?
Not initially but check your turnover every month and if the 12 months prior has exceeded the threshold, you must apply MTD from the following month. And under MTD, once in, you stay in. This is the case even if your turnover later drops below the VAT threshold.
My book-keeper/accountant currently deals with all this for me, do I need to do anything?
Ultimately, responsibility for this sits with you, therefore you must make sure that your book-keeper/accountant will be MTD compliant when the time comes. We do recommend that you have this conversation sooner rather than later, as if you need to make changes you may need time to assess your options and make the right choices for your business. If Ensors does your bookkeeping then we will make sure this happens.
Are there any exemptions?
Very few! Exemptions will apply under the following circumstances:
- Where a business is run entirely by members of a religious society, the beliefs of which are incompatible with the MTD regulations.
- It is not practical for the business to use digital tools, such as in situations where age, disability, location or any other reason make the taxpayer unable to comply.
- The business is subject to an insolvency procedure.
- Where a business meets one of the exemptions, an irrevocable election can be made to opt out of the exemption and apply the MTD regime should the taxpayer so wish.
What would happen if I didn’t comply?
HMRC will apply the same penalties as they currently impose for failure to keep or preserve records for VAT purposes. These can be found on the gov.uk website and can be as high as 100% of tax under-stated if HMRC deems the mistake to be careless or deliberate.
Above all, remember there is help at hand. We can assist in tailoring a solution specifically to suit your requirements, providing you with as much or as little as you need, whether it’s just software selection or full outsourcing.
To find out more simply send us a quick enquiry or contact your local office (see below).