MTD, you’ll likely have seen the acronym knocking about for a few years now, it’s the thing the government keeps putting back because it’s a huge change to the way businesses will handle their taxes, and there’s been quite a bit of push-back!
‘Making Tax Digital’ means the end of the paper tax return. So is this a bad thing? No, absolutely not. In fact, it’s great – but you need to be prepared for it.
MTD will apply to any business that is VAT registered and has a turnover higher than the VAT threshold. This includes sole traders, freelance contractors and businesses. Currently there are no plans to include those who are not VAT registered or who are VAT registered but sit under the threshold, however it is reasonable to assume that they may be included further down the line.
Throughout the course of the MTD narrative, the key dates have changed a number of times, here’s the most up-to-date timeline for your diary.
- April 2019 – businesses with a turnover higher than the VAT threshold (£85,000) must keep digital records for VAT
- April 2020 – businesses with a turnover higher than the VAT threshold (£85,000) must keep digital records and update HMRC quarterly, including payment of Tax and VAT quarterly
For anyone who’s thinking to themselves, ‘Great, that’s ages away’, please note that you will at some point be required to digitise your accounting records. Historical records are required for compliance (6 years), so start now and reduce your admin ahead of the deadline.
So Why Is It Going To Be Good For Small Businesses?
So the bad news is that you’re going to have to spend a little money to stay compliant.
It will also initially take a little more admin time for you to get used to regularly updating your chosen software, but once you’re on-board there are many ways that being MTD compliant will help your business.
MTD will help businesses;
- Keep records up to date
- Check their tax status frequently
- Plan for business growth throughout the year
- Reduce mistakes – in turn reducing penalties
- Reduce the need to store paper records
- Cut down on admin time
- And while it will initially cost businesses a little more to stay compliant, it is predicted that by 2020 businesses will see significant savings via MTD
Many small businesses have pointed out that they are exactly the minority who will be impacted the most, and have called on the government for support. It’s likely that a MTD update will be included in the Autumn Budget, which takes place on the 22nd November and we’ll keep you posted on the announcements.
What Are Warr & Co Implementing?
The Warr & Co team have been busily preparing for MTD for a while now. We have sourced a fantastic, user-friendly solution that we’re recommending to help our clients stay compliant.
We’ve been working with KashFlow, an award-winning piece of cloud-based accounting software for around a year now. And we’re currently in the process of launching the Warr & Co – Accounting Cloud, which has been developed in association with Kashflow.
However, if you’re already using a different cloud-based solution, our team are more than capable of working with whichever you’ve chosen.
While the reason you’ll eventually have to move to a cloud-based solution is MTD, you will find your business can benefit from such a change in the long-run. So if you’re still using a spreadsheet, it’s time to change now so that you can allow yourself a period of adjustment. We know change is hard, but please don’t leave it until the last minute.
Your account keeping software will need to be able to;
- Log all of your business financial information
- Keep your data secure
- Hold digital records going back at least 6 years
- Generate a VAT return and share it with HMRC
- Send VAT data to HMRC on a voluntary basis
- Receive data from HMRC
All of our recommended solution, the Warr & Co Accounting Cloud, is fully compliant. If you’re planning to use a different solution, please check if it is currently fully compliant with either your contact at the software supplier or your Warr & Co accountant.
Another solution worth considering is our Encompass service – which takes control of practically all of your business admin and accounting requirements.
Encompass provides your business with a full accounting service for just £125+VAT per month. As such, it includes access to the Accounting Cloud (Kashflow) at no extra cost. Encompass comes with a great range of other and benefits, including tax enquiry protection, 24/7 business legal helpline and all the standard accounting services you need to run your business. Read more about Encompass here.