Are you VAT registered? Do you use HMRC’s gateway to submit your VAT returns? If yes, do you know about “Making Tax Digital”?
The next entry in our “Ten Things” series addresses the key issues arising from HMRC’s plan to “transform tax administration”, so read on…
Making Tax Digital for VAT
Making Tax Digital (MTD) is being used to scare business owners by some parts of the media and a quick search of the internet will find some very irate commentators and lots of negativity towards HMRC. But at Kung Fu Accounting we see this as a major opportunity to improve your financial systems and get real-time business information, while remaining HMRC compliant.
However, before we get into that, here are the key things you need to know about MTD for VAT.
1. If you submit your VAT returns through the HMRC gateway, the system is changing and that won’t be possible for much longer.
2. If your annual turnover is above the VAT threshold (currently £85k) you will soon be required to submit your VAT returns using approved software. HMRC say you will not be able to use the gateway for VAT returns beginning after April 2019.
3. However if your turnover has never been above the VAT threshold and you chose to register for VAT voluntarily, this change will not apply to your business next April (but it will happen, so be warned!).
4. This development means HMRC are effectively forcing businesses to use accounting software to manage their bookkeeping (note – this isn’t necessarily a bad thing!).
5. So if you’re currently using spreadsheets or hand-written accounting books, you will have to change your system to remain compliant with HMRC.
6. But you do have options. An internet search will come up with plenty of accounting software packages, some free and some which cost. Do your research, ask your business contacts, friends and neighbours for their recommendations to help you find the right package for your specific situation.
7. Upgrading to real-time software may seem daunting at first, but keeping you legal is only a minor benefit. Automating the bookkeeping will save you time, and having accurate management information will enable you to make better, more informed business decisions to really take control of your business and drive it forward.
8. Don’t forget to ask your accountant for advice. This is a significant change to the way HMRC collect information about your business. Upgrading your bookkeeping system to be able to meet the new requirement needs careful planning to make sure it happens smoothly and seamlessly. Your accountant is ideally placed to help, and should be a great source of information and support.
9. Please don’t ignore this change, and don’t delay – Making Tax Digital is definitely happening, and for certain businesses it’s only a few months away! Better to plan for this, rather than rush through the changes next spring and risk making mistakes.
10. Finally, you need to know that this is part of a much bigger digitisation project (read more from HMRC here). So expect changes to the way we report for other taxes in the future.
Great question! Compliance with HMRC’s rules is of course absolutely vital, but using that as the main reason to change your business’ accounting function is really missing a trick – which is why we don’t go in for all that MTD scare-mongering.
We know (because we’ve done it, and because our clients have told us) that with the correct software, optimised bookkeeping processes and expert accounting support, extremely valuable financial information about your business can be made available with very little effort. And all the HMRC submissions will be taken care of easily too.
This means rather than looking over your shoulder at tax deadlines all the time, you’ll have live, real-time information to make powerful decisions to drive your business forward. That’s what we call #theKFAway.