Should You Be Ready for Making Tax Digital?

11 September 2018, 08:51

April 2019 is a big date for businesses that are registered for VAT. This is when the new Making Tax Digital for VAT system will begin. You might also see this written as MTD. Those who are enjoying a turnover of £85,000 or more will be required to use the new system. Those with a lower turnover or who subsequently deregister from VAT if their turnover falls below the current threshold will not be required to use the system.

Many businesses will already have made changes to ensure they comply with the new rules. But if you’re wondering what this is all about, stay put. We can reveal some of the details of the system and how it might just make life easier for you.

Chances are you might feel worried or have some concerns about using the system. However, the idea is to get everyone going digital to make it easier to submit the quarterly VAT returns. In fact, since you will be updating your information throughout the year, keeping your records on the new system, you won’t get that three-monthly rush you normally experience. Instead of hunting around through piles of receipts and invoices, it will all be online. That means you need only check the information to confirm everything is correct.

If you already use an online accounting system, you might be lucky and discover it is compatible with HMRC’s system. The official list contains quite a few familiar names already. You can count Clear Books, PwC, Sage, and Xero among them. Many others are already listed, and it looks as though other companies will join the list as well. For this to occur, the software must be tested and confirmed to work within the remit of the environment provided by HMRC. So, if you choose one of the above software providers, or another one on the list, you can guarantee you won’t get any compatibility problems.

You can also instruct your accountant to take care of all of this for you. They can act as a proxy on your behalf, so the submission of data won’t be a concern. It looks as if those who hate technology and refuse to be part of it will have an ‘out’ via their accountant.

Finally, if you do not yet have any accounting software and you are thinking of making the switch to digital, this could be a good time to do so. HMRC is going to provide free software for those who wish to use it. It may not be all-singing, all-dancing like some of the above examples are, but it should do the job. We await April 2019 with interest, when Making Tax Digital for VAT swings into action.