Making Tax Digital for VAT comes into effect from 1 April 2019. Are you ready and do you know what is required?
The first stream of Making Tax Digital (MTD) is in relation to VAT and any businesses (including companies, unincorporated business and charities) which are registered for VAT and with taxable turnover above £85,000 are required to be compliant with the new regime.
For many businesses, the first VAT return which will need to comply with MTD will be the quarter ended 30 June 2019.
So what doesn’t this actually mean?
Making Tax Digital falls into two parts. The first is that HM Revenue and Customs would like businesses to start keeping their records digitally. This means that many businesses will need to start thinking about using an accounting package to maintain their records.
The second part of MTD is the need to be able to submit VAT returns to HMRC straight from the businesses accounting package. Some accounting packages already do this, for example Sage desktop, QuickBooks Online and Xero, so if you are already using this method to submit your VAT returns, then little will change for you come April 2019.
As you can see, those business which already use accounting packages are half way there to being compliant with Making Tax Digital, however it is still worth checking that your current package will be compliant. Some versions of Sage desktop and QuickBooks desktop are not, so you may need to update or upgrade your system before April 2019.
HMRC have already stated they will not release any free software in relation to MTD for VAT, but they have been working with a number of leading accounting package providers and have published a list of those which will be compliant from April 2019. This can be found here.
With April 2019 only a few months away, my advice for those concerned about Making Tax Digital is:
Take a look at the software providers that will be compliant and sign up for demos or free trials to understand how the programme works and decide if it would be suitable for your business.
If you’re still unsure about which package to choose, speak with your accountant or business advisor to see if they can recommend a package based on your needs, and provide you with demonstrations or free trials.
Embrace the change and understand that your current systems or ways of working may have to adapt to be compliant with MTD!