The Making Tax Digital initiative is closing in fast; the compliance date is 1st April 2019. Don’t be caught out and risk fines when we can give you a clear roadmap on how to be prepared and be compliant. Get a good financial foundation by having all your information in order and at your fingertips. It will have you ready for the change and also give you a solid planning strategy to plot your company’s growth.
In a bid to keep timely online records accessible at all times HMRC will soon be launching the Making Tax Digital (MTD) initiative. It requires all VAT-registered businesses above the £85k threshold to submit returns online, using compatible accounts software such as Xero. There are limited exceptions, and those who do fall into the exceptions group will still need to start filing online VAT returns come October 2019; not much of a respite. If you are below the threshold you can still choose to opt in. If you’re VAT registered, then you need to know the ins and out of this process.
Why is MTD happening?
HMRC have brought in the initiative in a bid to be more effective, more efficient and make the process easier for taxpayers. This fully digital tax system may seem like just another change, but once adaptations to the new system are made, tax returns will be less painful to process for both parties. There will be no change in deadlines or return dates, regardless of the scheme you are on.
This is the future of tax as a whole; plans are underway to bring in MTD for Income Tax some time in the near future (post-2020).
What do I need to do?
All VAT returns will need to be submitted through HMRC‘s new dedicated MTD system that will communicate directly with your accounting software. You will need to upload all transactions through accounts software that is “functional compatible software”. If all transactions are correctly recorded electronically there is no requirement to maintain digital copies of the source documents, although this may be your preference.
To read all the requirements in full please visit the VAT Notice 700/22: Making Tax Digital for VAT page on gov.uk.
Removing the unnecessary stress
If you’re already using Xero to submit your VAT returns you can breathe a sigh of relief right now. An update will be rolled out automatically ensuring an easy path to online submission. There’s no additional cost. As it will become a legal requirement Xero sees it as a mandatory part of the basic package. If you’re not already using Xero, then making the move before April 1st (2019) could save you a lot of headaches in the coming months. If you’re thinking about making the move then we would be happy to help you get your business accounts up and running in Xero.
Xero and Making Tax Digital
It’s no secret we specialise in Xero but it’s also the smart play. The Xero team consulted with HMRC on their MTD initiative, and as such ensured the software would be fully compliant, both now and moving forward. They’ve always been committed to supporting small businesses and have been placed on the HMRC list of Software Suppliers Supporting MTD.
Happy to help
If you’re thinking of making the move to Xero or want some reassurance on how to correctly submit your returns through Xero, we will be happy to talk you through it – Get in touch.
The best time to start is now.