From April 1, 2019, Making Tax Digital for VAT requires VAT registered businesses with taxable turnover above the VAT registration threshold (currently £85,000) to keep records in digital form and file their VAT Returns using software.
The Making Tax Digital rules apply from your first VAT period starting on or after 1 April 2019. Businesses with taxable turnover above the VAT registration threshold will no longer be able to submit their VAT returns using the HMRC website.
There are more rules and regulations, including the need to keep digital records, which you can read about in HMRC VAT Notice 700/22 but these are the headline changes.
So what does MTD for VAT mean for most businesses?
Make bookkeeping digital and you are making tax digital
We’ve been advising businesses for almost two decades to use proper accounting software and ditch the spreadsheets and paper records. This is because accounting software does the job you need, helping you with:
- management information
- VAT returns
- credit control
- year-end accounts
It’s never been cheaper or easier to use than it is today whether you adopt a cloud-based solution or desktop software.
All of the cloud-based accounting solutions claim to be compatible with MTD but if you’ve been using desktop software for many years you may need to upgrade to the latest version for MTD compatibility.
Ditch the spreadsheets and the paper
Earlier in 2018 we helped two businesses transition from spreadsheet accounting to using a cloud accounting solution. They both have six-figure turnover so I was amazed they were still using spreadsheets. In one case it was what their accountant offered 🙁
Essentially, you buy the software, pick a date to start from (ideally the start of your financial year) and off you go! That said, it’s probably not a good idea to do it yourself. You can outsource much of the bookkeeping but at the very least get help from someone who knows the software.
You don’t want to be the guy who said “I stopped doing my books when I realised I was making them worse!”
As for the paper – up to date accounting software allows you to store documents, such as invoices, expense claims, receipts etc. as PDF documents as part of a transaction. Let your accounting software be your filing cabinet!
A word of warning
All businesses are different and VAT rules can be complex so before you dive in get some advice from your accountant or HMRC to make sure you are applying the VAT rules correctly.
That said, our overall view is simple – start using good accounting software as soon as you can and check that your existing software is compatible with MTD for VAT.
If you think we can help you – please give me a call on 020 7125 0270.
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