Making Tax Digital and VAT: are you ready?
Over the next few years, the government’s Making Tax Digital (MTD) initiative will make UK tax administration very different for businesses. HMRC is striving to become one of the most digitally advanced tax administrations in the world, which means a move towards the cloud and greater automation.
From April 2019, VAT registered businesses with an annual turnover above the VAT threshold (£85,000) will be required by law to use MTD to meet their VAT obligations. This will involve setting up a digital tax account and filing quarterly returns online, using an accounting system or app that is integrated with the new digital gateway that HMRC is currently building.
This is not just a matter of filing your VAT return online. HMRC will want online access to transaction details and VAT calculations. The submission of VAT returns in Excel or on paper will become a thing of the past.
You may have seen recently that HMRC has paused the MTD for individuals programme. However, for those required to submit VAT returns, the MTD for VAT programme is still going ahead to the schedule above.
Today, only 11% of VAT returns are filed using software. This suggests that many businesses have crucial preparations to make ahead of April 2019, to familiarise themselves with the process and the information required. MTD could have a significant impact on how you work, so it’s vital you begin preparing for it as soon as possible.
Many providers of accounting and bookkeeping software are developing the capability to meet HMRC requirements and submit directly from their software, including Xero, one of our recommended providers.
If you’re not using online software yet, the prospect shouldn’t worry you. It’s an opportunity to become more efficient and more profitable: both things we are pleased to support our clients with. If you would like to discuss your options, please get in touch with your usual BKL contact or use our enquiry form.