Making Tax Digital
Making Tax Digital – act now to comply with new HMRC legislation
From April 2019, VAT-registered businesses will have to submit digital VAT returns using MTD-compliant software. Other businesses and landlords are expected to follow suit from 2020, so it’s time to move away from your spreadsheets and turn your receipts into digital records – paperless accounting is heading your way and our team is here to help.
What is Making Tax Digital (MTD)?
MTD is HMRC’s programme to introduce a digital tax system which will require most businesses, self-employed people and landlords to use digital software to keep tax records and update HMRC on a quarterly basis.
Digital tax accounts will enable us to see all our tax information in one place, with some information being sourced directly from banks and other third parties.
There are three components to MTD for VAT which are:
- Businesses will be required to maintain accounting records digitally in a software product or on excel spreadsheets;
- Taxpayers are to submit their VAT returns using functional API enabled software; and
- Taxpayers must be able to receive information from HMRC via the API platform therefore taxpayers must have their own email address registered with HMRC for this purpose.
How will this affect your business?
If you’re already using cloud accounting, the impact will be minor as companies such as Xero are all set to meet HMRC’s new requirements. But, if you’re using older software or you rely on manual records, you need to act now to prepare for the changes.
How do I prepare for MTD?
Despite concerns in the press about the burden on businesses, there are some positives to MTD – done correctly, it could mean a bit of short term pain for long term gain.
In most cases, we recommend clients use a cloud accounting system such as Xero. It’s cost-effective, allows you to store all of your information in one place and will help you plan and monitor your business finances.
For those with minimal transactions, new software which converts information from spreadsheets into MTD-compliant returns may suffice, although you won’t benefit from the wider time-saving and accuracy improvements cloud accounting will offer. If you’re unsure about the best solution for your business, why not book onto one of our free Cloud Accounting Essentials Workshops.
How can HB&O help?
Our team can advise you on the best solution for your business and help you get ready for making tax digital well ahead of your compliance deadline. We’ll also recommend the best apps to speed up your bookkeeping and move other paper-based systems online.
We are accredited partners of the top cloud accounting software packages including Xero and Sage, and will help you find the right package for you.
To book onto one of our ‘cloud accounting essentials’ workshops, visit MTD Workshops
For more information contact your normal HB&O adviser or email us on email@example.com.