I am a VAT registered business and am worried about Making Tax Digital. Will I have to change how I file my VAT returns?
Answer: Making Tax Digital (MTD) is a government initiative that will see the administration and submission of taxes being carried out online.
HM Revenue & Customs believe that a digital and more modern approach to tax will allow businesses to get their taxes right more easily.
The first phase of MTD will be rolled out in April 2019 and will require all businesses that are VAT registered and have a turnover in excess of the VAT threshold (currently £85,000) to file their VAT return digitally. The option to use H M Revenue & Customs’ website to submit VAT returns will be removed. If you don’t have the necessary software (such as Sage or Xero to name just a couple) then we can file the returns on your behalf. However, in future H M Revenue & Customs will expect more and more data, so we recommend that records are kept digitally as soon as possible.
A variety of software packages from recognised brands are available and most are user-friendly and relatively inexpensive.
As advised in reply to a similar question in the summer, it would be wise for businesses that will be affected by Making Tax Digital in April 2019, such as your own, to be prepared for the change well in advance. The first returns to be filed digitally will be for the June 2019 quarter, i.e. the first VAT period that starts following 1 April 2019. If, for example, your VAT quarter is May 2019 then the first digital return will be August 2019.
Going forward, other taxes will be phased into the MTD initiative. This will include Income Tax for the self-employed. Such a system will allow individuals to easily determine their tax position throughout the year, which in turn will help with budgeting.
As MTD will see businesses keep their accounting records as they go, this should also ease issues when it comes to preparing financial statements at the end of the financial year. Much of the information that needs to be supplied to your accountant will have already been prepared. The system will also make it easier to pass information to your accountant, as you will be able to provide them with access to your records online.
If you are using Excel or paper records then it is best to act now so that the most suitable software for you and your business is in place for when the first submissions are required.
If you would like to arrange a free consultation to look at the packages available or require any other assistance in relation to Making Tax Digital, please contact Gemma Newstead on 01424 720222 or email her at GemmaN@ashdownhurrey.co.uk.http://bit.ly/2R5sPhW