Making Tax Digital
Making Tax Digital is a key part of the government’s plans to make it easier for individuals and businesses to get their tax right and keep on top of their affairs – meaning the end of the annual tax return for millions.
Every individual and business now have access to their own personalised digital tax account and these are being regularly expanded and improved. HMRC’s ambition is to become one of the most digitally advanced tax administrations in the world, modernising the tax system to make it more effective, more efficient and easier for customers to comply.
A number of concerns about the pace and scale of change have been raised. As a result, the government has announced that the rollout for Making Tax Digital for Business has been amended to ensure businesses have plenty of time to adapt to the changes.
From April 2019, VAT registered businesses with a taxable turnover above the VAT threshold (£85,000) will be required to keep digital VAT records and send returns using Making Tax Digital (MTD) compatible software.
What does this mean for my business?
From April 2019, affected businesses will no longer be able to submit their VAT returns through the HMRC Government Gateway. Businesses must use MTD-compatible software which should enable businesses to prepare and submit VAT returns electronically to HMRC. Therefore the first period that your business will need to comply with MTD will be the period starting on or after 1 April 2019.
MTD will enable businesses to install an organised bookkeeping function (if one is not already in place) which would help business owners manage their financial affairs. Leading software providers have enhanced their service offering and offer the functionality to raise sales invoices, chase debtors, manage unpaid purchase invoices. Some software even links to your online banking and periodically download transactions thereby eliminating manual data entry. You can also receive payments from customers through payment gateways.
What do I need to do to get ready for MTD for VAT?
If you already use bookkeeping software, it’s likely you’re software is already compliant with MTD legislation. You should confirm this with your software provider.
Spreadsheet accounting is a popular method to managing your business records. Even though HMRC are keen for businesses to move away from spreadsheet accounting, it can be argued that spreadsheets are kept in a digital format. HMRC allow the continued use of spreadsheet accounting provided it can be linked with compatible software.
Manually kept records will no longer be mandated. You will need to make a decision to which software is suitable for your business.
How can Shenward help?
Shenward has been implementing a digital strategy to enable our clients to benefit from the implementation of MTD. We recognise the importance of having a strong bookkeeping function in place whether to assess performance or raise finance through debt or equity.
We have been working alongside a leading software provider to enable our clients to benefit from the MTD legislation. Our seamless implementation and integration between us and your business will enable us both to analyse and evaluate financial performance on a regular or ad hoc basis thereby enabling reliable budgeting and identifying any potential cash flow implications. Appropriate solutions can be devised and implemented accordingly.
We will be contacting our clients soon to discuss a pragmatic implementation strategy. However please get in touch with us to discuss your options and any queries you may have.
Conclusion
MTD for VAT is just the start of HMRC’s digital implementation strategy. Income tax and corporation tax will follow suit from 2020, at the earliest. Therefore we advise swift action to minimise any disruption to your business.
Further information about MTD can be found on the HMRC website:
https://www.gov.uk/government/publications/making-tax-digital/overview-of-making-tax-digital
Author
Sonal Dewedi
sonal@shenward.com
