Around four months have passed since the implementation of Making Tax Digital (MTD) for VAT, and HMRC says more than 600,000 businesses have signed up so far.
Around 400,000 VAT submissions have been made using MTD-compatible software, and more can be expected soon as the first quarterly filing deadline of 7 August approaches.
It’s an exciting time for us, with more and more businesses going digital and enhancing their business performance as a result.
We’ve been working with Xero accounting software since 2010, and have seen its positive impact on hundreds of our clients.
It’s given business owners better information and helped them to collaborate closely with us, saving their time and making their accounting process easier.
So, if you have yet to switch to digital accounting for MTD, here’s what you need to know.
The story so far
MTD for VAT became mandatory for most VAT-registered businesses with a taxable turnover over £85,000 on 1 April 2019.
These businesses are required to keep digital records, and submit their returns using MTD-compatible software.
Complex businesses, listed here, were given a deferred start date of 1 October 2019.
A further deferral beyond 1 October has also been announced for NHS trusts and Government departments, although a new date has yet to be confirmed.
Why was it introduced?
The main principle of MTD is to make it easier for businesses and individuals to get their tax right.
Keeping tax information on software and sending that same data directly to HMRC is expected to reduce the mistakes that are often made when keeping records on paper and manually entering data into returns.
And, by switching to HMRC-approved cloud accounting software like Xero, businesses can see the benefits of more efficient, collaborative, real-time accounting.
We estimate that businesses save two hours a week by switching to Xero – extra time they can dedicate to doing what they love.
What do you need to do?
If you’re an Evans & Partners client, not a lot. We’ll sign up for MTD on your behalf, and make any changes that need to be made.
If you submit VAT yourself, you’ll need to sign up once you’re ready to make digital returns. You can read our guidance for this here.
Signing up too soon may cause problems if your systems are not prepared, so make sure you plan this carefully and don’t rush into it.
The deadline for making your first MTD for VAT return will depend on when your VAT return quarters fall.
Businesses and individuals that do not meet the criteria for MTD for VAT are not currently required to file taxes under MTD rules, but they may be able to join the voluntary pilot to send income tax updates.
With mandatory digital reporting for income tax and corporation tax set to come in from 2021 at the earliest, it’s worth getting to grips with the scheme sooner rather than later.
We can help
MTD doesn’t need to be a worry or a burden on your business. We can explain what you need to do and when to meet the requirements, and help you make the most of the new scheme.
Contact us today, or find out more about our VAT service.