Making Tax Digital (MTD) has been the subject of much delay and speculation over the past few years that you’d be forgiven for wondering if it would ever take effect.
But now, with digital reporting for VAT set to become mandatory in less than a year’s time, there’s a very real need for many VAT-registered businesses to prepare for the new requirements.
If your business is registered for VAT and has a taxable turnover above the threshold of £85,000, you will be required to keep digital records and file your VAT returns using MTD-compatible software from April 2019.
That’s not as far away as it sounds when you consider the changes you’ll need to make, so now’s the time to make sure you’ll be ready.
Update on Making Tax Digital
So far this year, the scheme has gradually opened up to more businesses and individuals.
In March 2018, the government opened its MTD pilot scheme for income tax to the public. Self-employed businesses and landlords are able to voluntarily opt in and report their income tax digitally.
A MTD for VAT pilot scheme was then launched in April 2018, which is currently open to selected volunteers only. HMRC has said it will open this up to the public later in 2018.
How can you prepare?
There are 2 main requirements under MTD. You’ll need to:
- keep your records digitally
- file your return to HMRC, using compatible software.
There are a few ways you can start getting ready ahead of time, so the change doesn’t cause too much disruption to your reporting process.
Get into the digital record-keeping habit
If you’re not keeping digital records already, starting to do so now will make your transition to digital reporting smoother.
We can help you get started with a range of cloud accounting options. Find out more about our online bookkeeping service.
Start looking into your software options
The software you use to file your digital returns will need to meet HMRC’s requirements – so not just any accounting app will do.
HMRC has published a list of approved suppliers that have tested and demonstrated their software.
This list is being updated as the Revenue approves more suppliers.
Get involved in the pilots
The MTD pilot scheme for income tax is already available to the public, with the pilot scheme for VAT soon to follow.
Joining these could give you more time to get used to the system before it becomes mandatory.
However, be aware that these are still a part of the test process for the new system. You may run into some technical issues along the way – although HMRC has said it will prioritise resolving any problems relating to VAT.
To allow time to fully test the new system, MTD won’t apply to taxes other than VAT until 2020 at the earliest.
Digital tax reporting for individuals could be introduced in the future, but work on this service has currently been postponed.
Speak to us
We can help you get ready for MTD, and can answer any questions you have ahead of the introduction of digital accounts for VAT-registered businesses next spring.