Making Tax Digital (MTD) is the most fundamental change to the administration of the tax system for at least 20 years.
The essential elements for businesses and organisations are:
- Paper records will no longer be sufficient: It will become mandatory for almost all businesses and organisations (self-employed, partnerships; limited companies and others) to use software or a spreadsheet to keep accounting records. Paper accounting records will cease to meet the requirements of tax law.
- Returns and quarterly reporting: There will be a requirement to submit VAT returns and income tax updates (quarterly and annual) to HMRC, directly from software.
As your accountants we will support you through these changes and provide the ongoing services that you need.
When does it start?
- VAT: As your business is registered for VAT and your turnover is above the VAT threshold you will be required to keep digital accounting records and to file your VAT returns using MTD compliant software from April 2019 (the first VAT period starting on or after 1 April 2019). The current online VAT return will no longer be available.
- Income Tax (self-employed, partnerships, trusts and landlords who compete self assessment tax returns): MTD is expected to become mandatory for income tax reporting, but not before 2020. Pilots of MTD for income tax have started.
- Corporation Tax (limited companies): The timings for MTD for corporation tax have yet to be confirmed but it will not become mandatory before April 2020.
What do I need to do now?
If you already use MTD compliant software to submit VAT returns, contact your software provider to confirm timings and/or additional costs. For the majority of our clients, Xero will be upgraded automatically so that you can easily submit your MTD VAT return to HMRC with no additional cost.
If you’re looking to move to accounting software, we’re here to help you make the transition run as smoothly as possible. This is your opportunity to streamline your accounting and business management, as well as getting MTD compliant.
If you currently maintain records on excel or paper your processes will need to change. You will need to provide records to us promptly after each quarter-end and engage us to do the bookkeeping or acquire and use appropriate software such as Xero.
Please note, all businesses already using Xero (or other MTD compliant software) to submit their VAT returns have nothing to worry about. Xero will automatically upgrade the VAT functionality so you will be using MTD-compatible software come 1 April 2019 – and there will be no upgrade fees.
If you would like to engage us to implement software for you, please call 01392 495483 or email [email protected].