Making Tax Digital (MTD) will be compulsory for VAT from April 2019 for businesses with a turnover exceeding the VAT registration threshold (£85k). In this blog we look at how business owners can start to prepare for these new regulations.
What are the new regulations?
Businesses affected will be required to:
- Keep VAT records digitally using MTD compatible software. Businesses will no longer be able to keep manual records for VAT reporting purposes.
- Submit their VAT return information to HMRC using MTD compatible software. Businesses will no longer be able to manually enter the data on the HMRC portal.
- Keep an electronic VAT account. This will be a new requirement for businesses.
Any business in breach of the new regulations will be subject to the current VAT fine regime for non-compliance.
What is MTD compatible software?
Software developers now have a range of MTD compatible software available. If you already use accounting software you may be able to upgrade to an MTD compatible version. If you haven’t used accounting software before or want to improve your existing systems, you may decide to explore new solutions and their added benefits.
Challenges for business owners
By preparing early, business owners can have peace of mind they will be compliant when the new regulations are introduced in 2019:
- Increased costs
Businesses will most likely face increased costs in preparing to transition to MTD.
Those that do not currently use software will need to purchase the required functional compatible software. There may also be additional hardware costs as well. Businesses that currently use software may need to upgrade existing software or develop bespoke systems that enable the VAT return information to be compiled and then transmitted to HMRC electronically.
It may be necessary for smaller businesses to request additional assistance from their agent or hire additional internal resources to deal with the changes.
- Training your team
Your team members may need training on your new MTD software to ensure they are able to enter the relevant information correctly and submit it to HMRC within the timescales. Businesses moving from manual records may need to provide additional IT training for their team to ensure they have the skills and confidence to fulfil this role or recruit additional support.
- Embracing new opportunities
It is an ideal time for businesses to consider cloud accounting packages. These streamline accounting and bookkeeping processes which frees up time for business owners and managers to focus on what they do best. Being cloud based they can be accessed by laptops, phones and tablets to enable businesses and their accountants to access the latest information where and when they need it. Learn more about the benefits of cloud based accounting packages with our success story.
How Hallidays can help
You can learn more about the regulations and the information that needs to be submitted digitally by reading our news article.
If you’re a Hallidays’ client, we can provide advice and support with updating your software or finding a new software solution that’s right for your business.