Why Your Business Should Be Making Tax Digital
Everything is digital these days - books have become eBooks, CDs have become MP3s, and desks have become laptops. The taxman is no different, and the introduction of HMRC's 'Making Tax Digital' initiative (MTD) is changing the way in which all taxpayers file their returns. Paul McGrath, Accounting Manager at Chesterton House, explains who is affected and what you need to do to comply.
HM Revenue & Customs describes 'Making Tax Digital' as "a key part of the government's plans to make it easier for individuals and businesses to get their tax right and keep on top of their financial affairs". This will fundamentally change the way taxpayers complete their taxes, with the intention to make the tax system more effective, efficient and easy to get right.
Making Tax Digital (MTD) comes into effect from 1st April 2019, and will initially apply to all businesses with a taxable turnover above the VAT threshold (currently £85,000) in the following ways:
All businesses will be required by law to store their financial records digitally and submit VAT returns from MTD-compatible accounting software.
The HMRC online account page used by businesses to submit VAT returns will be closed to those who are required to comply with MTD.
Paper records will cease to meet the legal requirements in tax legislation.
It's very important to understand that MTD is a legal requirement and there will be penalties for non-compliance...
Don't panic though!
If you are an existing bookkeeping/ VAT client, we already do this for you and have been doing so for the last few years.
Our cloud-based accounting software is proving very popular, as it allows you to:
Capture receipts and payments from your bank accounts directly.
Use your smart phone to photograph expenses and have them filed straight into your accounts.
See your results 24/7 via an app on your phone.
Create quotes and sales invoices easily.
Reduce the amount of paper you need to keep on file.
Okay... so what do I have to do?
As mentioned, if you are an existing bookkeeping client you have absolutely nothing to do, we have it covered.
If, however, you complete your bookkeeping in-house you will need to ensure the software that you use is MTD compliant. When using spreadsheets, you will need to use bridging software to file your VAT return online for periods ending after 1st April 2019 and quarterly thereafter.
If you have previously used manual records such as a cash book to produce the information required to file a VAT return, you must switch to MTD compliant software.
We can assist you in finding and putting into place a system that works for you.
I'm an individual or business who doesn't pay VAT....need I be worried?
If you are an individual or business that falls under the VAT threshold, you can continue to complete your tax returns as normal. However, it is worth noting that while there is no legal deadline for the rolling out of MTD to other areas of tax, it is clearly the government's intention to continue to move in this direction.
We therefore recommend that you begin the digital transition as soon as possible.
If you are currently using manual records to do your returns, or if you would like to gain the benefits of tracking your accounts and expenses instantly using our cloud-based software, we can talk to you and explain how easy it is to make the change to making your own tax digital.
Chesterton House Accounting Services are cloud accounting specialists. We can help you make the transition to digital accounting as smooth as possible, and we can advise you on the software you will need and how to comply with the quarterly reporting requirements.
If you have any further questions about MTD you can contact us here.