Despite a great deal of discussion amongst the accountancy industry, recent research has suggested that a worrying number of businesses themselves don’t know about the forthcoming Making Tax Digital (MTD) changes. The research, by the Institute for Chartered Accountants in England and Wales (ICAEW), suggests over 40% of small firms soon to be mandatorily included in the UK Government’s MTD initiative remain unaware of the project.
This is obviously a concerning statistic – the ideal scenario for small businesses is for them to begin using new accounting software well in advance of the 1st April deadline so they can get used to the new methods.
But what exactly are the changes, who will they affect and what action do you need to take?
All UK VAT registered businesses above the £85,000 sales threshold will be required to make digital records and file VAT returns directly via MTD-approved software from 1st April 2019. Businesses must instead use ‘functional compatible software’ (digital records) that can connect to HMRC’s system via its API link to file their UK VAT returns.
This means that as of 1st April 2019, any business that applies VAT to its sales will no longer be legally allowed to keep manual records for accounting purposes. This includes paper records and applies to both sales and purchases for which VAT is claimed.
The process of manually keying-in VAT return data from spreadsheets into HMRC’s online portal must also cease as of the 1st April.
A further requirement for the new rule will require digital links to be maintained between any accounting package or spreadsheet through to HMRC’s new filing API.
This is the first stage of the UK’s MTD initiative to digitise tax records and submissions, and MTD is likely to extend to other taxes from 2020.
Compliance with the new requirements will require fundamental changes to the existing processes and systems of many businesses. At Stafford & Co, we’ve been in the process of educating our clients about MTD for several months and working with those clients that will be affected by the 1st April deadline to ensure they will be ready.
LARGE COMPANIES BEWARE: Are you ready for MTD?
The answers to these questions are key to ensuring you’re ready for MTD. Planning in advance is vital to minimise cost and ensure returns can be submitted on time. Ask the Stafford & Co team about MTD so we can help you prepare in advance.
For more information on how we can help your business get ready for MTD, contact a member of the team on 01204 368 550 or email firstname.lastname@example.org