So they’ve been talking about it for a couple of years now and Making Tax Digital (MTD) is finally here!
With effect from 1st April 2019 all VAT registered businesses with a taxable turnover above the threshold, currently £85,000 must keep records in digital form and file their VAT returns using HMRC approved software.
The first thing you need to do is the turnover test. Turnover = the value of everything that you sell that is not VAT exempt. This applies on a 12-month rolling programme, therefore businesses need to keep a careful eye on whether turnover levels exceed threshold. Once you’ve exceeded £85,000 you must register for VAT and file under MTD rules.
You can opt out if your business is run by members of religions who discourage the use of technology, if you are facing insolvency or if your business is run by people who cannot reasonably be expected to comply due to their age, physical or mental condition or have a lack of access to technology. HMRC will be carrying out checks on businesses who opt out to ensure their reasons are valid.
I’m therefore going to assume that most of us will fall within MTD rules and regulations.
If you are already working with a bookkeeping or accountancy software package, you will need to check if yours is approved by HMRC – visit their website for more details. If it is compatible you will then need to enable the MTD function within the software. Your accountant would probably help you with this.
If your software is not approved by HMRC or indeed you are currently not working on a bookkeeping package, then you will need to source a suitable solution. We recommend QuickBooks Online, which is the world’s number one cloud accounting solution, although there are others you may choose from.
You will then need to decide if you will be filing MTD yourself or whether you will be using an agent like an accountant or bookkeeper.
If you are going to file yourselves and you are about to embark on using new software, then I believe that training is key. Our sister company Footprints Training and Growth runs workshops on a regular basis.
Planning and preparation are key. I’d recommend that you talk to your accountant as soon as possible, if they’ve not already spoken to you.
Lastly, if you are breathing a sigh of relief because this doesn’t apply to your business, think again!
MTD applies to all of us from April 2020, so it is not too early to start planning and utilising the correct software.