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Making Tax Digital Update

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JACK MOORE, who heads up our cloud accounting team, discusses Making Tax Digital and everything you need to know.

Making Tax Digital (MTD) for VAT came into effect in April 2019 and means that there are new requirements that will affect most VAT-registered businesses. But the new system has much wider implications. MTD will spell fundamental changes to the way that businesses keep their records, as well as the process of VAT return submission.

MTD in a nutshell

MTD means that, for those businesses affected, VAT returns must be made directly through software that has a digital link to HMRC. That means using digital software to maintain your bookkeeping records too.

Am I affected?

MTD affects all businesses with annual taxable turnover above the £85,000 registration threshold on 1 April 2019. Any business which registers to comply with MTD, whose turnover subsequently falls below the threshold, must stay MTD compliant even though they no longer exceed the threshold. The only exception is if they are completely deregistering for VAT. Voluntarily registered businesses, currently below the registration threshold, can elect to join MTD but are not mandated to do so.

Digital software

Under MTD rules, bookkeeping records will have to be kept digitally, within a software program which can connect to HMRC systems directly. There are a number of off-the-shelf software packages which would be suitable for most businesses, including QuickBooks Online, Xero and Sage Business Cloud. These three providers are the market leaders, but there are a whole host of MTD-compliant options available on the market.

There are many benefits to using digital software, but the feedback that we have had from our own clients is that it helps save them countless hours of bookkeeping time, so they are now finding that they have freed up those extra hours to spend on more important areas of their own businesses. Not only that, but digital software allows business owners and decision makers access to up-to-date accounting results. These can be tailored to highlight the indicators which are most critical to their business, which they can analyse to make key decisions and ultimately drive growth.

Timetable & when to register

For most businesses, the MTD rules must be observed from the first VAT return period that begins on or after 1 April 2019.

If Page Kirk prepares & submits your VAT return for you, then you do not need to worry about registering for MTD, as we will take care of the process for you. If you prepare your own VAT returns, then you will need to register for MTD with HMRC.

PLEASE DO NOT register for MTD before you have submitted your last non-MTD compliant VAT return, otherwise you will need to be fully MTD compliant for that return even though the quarter occurs before the MTD rules come into force. If you get this process wrong, your VAT returns will be received by HMRC, but they will not be able to read them, as the return will go into what the Revenue describe as 'a black hole' within their servers. If this happens, you will have to go through a lengthy process to re-submit your figures to manually.

Once you have registered for MTD with HMRC, you will receive email confirmation of your successful registration within 72 hours. After receiving this email, you will need to enable MTD within your chosen digital software. After these steps have been completed, you will be MTD-ready and all set to submit your MTD compliant VAT return.

Your VAT Quarters

First MTD return

MTD registration opens

     

Mar/Jun/Sep/Dec

June 2019 quarter

15th May 2019

     

Apr/Jul/Oct/Jan

July 2019 quarter

17th June 2019

     

May/Aug/Nov/Feb

August 2019 quarter

15th July 2019

'Bridging' software

If the thought of converting to digital software is giving you sleepless nights, then there is an alternative, although it does mean you will be missing out on the many related benefits that packages such as QuickBooks, Xero and Sage offer.

There are programs which have been described as 'bridging' software. They have the digital link to HMRC that is required to be MTD-compliant, but do not require all of the transactions of the business to be held digitally. This type of software is typically not available for single-users, without paying for a bulk batch of licences.

Page Kirk can offer to submit your VAT return through our own bridging software, if you would prefer not to convert to using digital platform. Please drop us an email enquiries@pagekirk.co.uk or give us a call on 0115 955 5500 to discuss your requirements in more detail.

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