The government’s Making Tax Digital (MTD) initiative is progressing more slowly than originally planned, but it is moving forward, and will continue regardless of Brexit. The first stage will involve MTD for VAT.
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 building. HMRC will also want online access to transaction details and VAT calculations.
To be prepared, you will have to ensure your software is compatible with MTD. If you’re used to submitting VAT returns on spreadsheets, you will need ‘bridging software’ to bridge the gap between Excel and HMRC’s system. If you are using a bespoke software or ERP system, it is worth checking with your software provider what their plans are and if they will be able to upgrade the software in time.
The most reliable alternative is cloud based (online) accounting and bookkeeping software. Leading providers including Xero have confirmed they will be compatible with MTD by April 2019: you will be able to submit directly from their software and meet HMRC requirements.
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 are things we are pleased to support our clients with: we work closely with our recommended provider Xero, as one of their platinum partner firms.
If you would like to discuss your options, please get in touch with your usual BKL contact or use our enquiry form.