Are you ready to throw away those paper invoices and do your bookkeeping using only online software? Do you need to prepare for such a change?
If your turnover is above the £85,000 VAT threshold then yes, you have just 12 months to prepare. Smaller businesses are expected to go digital sometime after 2020.
MTD – in the making
March 2015 Chancellor Osborne announces “the end of the Tax Return” with the introduction of Making Tax Digital (MTD). The idea being that all self-employed people and businesses will be required to keep digital records (paper seemingly being outlawed) and the usual Tax Return will be replaced with 4 quarterly statements + a year-end statement submitted electronically to HMRC.
Over the following months accounting bodies and business groups identify a mountain of hurdles before this grand idea could possibly be implemented.
Summer 2016 and Brexit happened – which seems to have dramatically slowed down the implementation of MTD. The idea lives on but it’s very much a shadow of its former self.
MTD – where are we now?
The most recent government update was 13th July 2017 in which the following implementation timetable was outlined:
• only businesses with a turnover above the VAT threshold (currently £85,000) will have to keep digital records and only for VAT purposes
• they will only need to do so from 2019
• businesses will not be asked to keep digital records, or to update HMRC quarterly, for other taxes until at least 2020
What does MTD mean for you?
• Smaller businesses trading under the VAT threshold can breathe easy for now. At the earliest digital records and quarterly reports will be required from April 2020 (I suspect later).
• Businesses with a turnover above the VAT threshold should use 2018 to review which cloud software would best suit their needs. Now, this is where things become a little uncertain as the government are still to define exactly what will be required to comply with MTD for VAT. It is so far thought that such businesses will no longer be allowed to keep their records on spreadsheets and then manually transfer the figures into HMRC’s online VAT submission tool. HMRC’s aim is that VAT Returns are submitted directly from the software on which your records are kept. Whilst we still await precise guidance this year is probably a good time to consider using cloud accounting software from the start of your next financial year. Unfortunately, such software isn’t free but it does offer excellent reporting facilities and automation of processes (inc. bank feeds). We, like many of our clients, already use cloud accounting and wouldn’t look back.
Clients of ours that are most likely to be affected will be contacted by email shortly.
For now, even if you’re not immediately affected, it’s worth knowing that HMRC are pushing ahead with MTD – although, sensibly, at a much slower pace than originally announced.
Enjoy saving tax?