You might have heard about Making Tax Digital (MTD), the government scheme which will require all VAT registered businesses to keep digital VAT records and submit VAT returns using 'MTD compatible software' to HMRC.
The requirements will come into effect on 1st April 2019. So, as a UK company, how will MTD affect your business?
If you've already been using a digital accounting package for the purposes of recording information related to VAT, then MTD is likely to be a smooth transition for you. If you do not record and submit VAT information digitally, it is advisable to start planning for the change now.
What Will Change?
If you've been relying solely on spreadsheets to record and submit your VAT information up until now, you will have to change how you report your data. These records need to be stored digitally, and when they are submitted to HMRC, must be done so using software which has been verified as HMRC-compliant.
Does Only VAT Apply?
At the moment, only VAT information is covered by the MTD regulations. However, there are dates pencilled in for MTD to be introduced to other taxes. These include sole traders' National Insurance, income tax and corporation tax for limited companies. It is understood that MTD will be introduced for these taxes no earlier than April 2020. An MTD pilot for Income Tax is currently being run, focusing on sole traders with one business.
What Next?
If you are a business, limited company or sole trader with a turnover above £85,000 per year for the current tax year (2018/19), you need to comply with MTD by 1st April 2019. From that date on, businesses which are VAT registered must store and submit their records via the correct digital means.
If you don't currently have the in-house expertise to make the digital transition independently ahead of MTD, you should work with an accounting specialist with the right know-how to deliver the changes on your behalf. That includes advising you on the right software which not only meets with HMRC's criteria for the storage and submission of VAT information but can also improve the operational efficiency of your business. Using the latest accounting software, you can benefit from being able to view a 'live status' of your taxes at any time.