06 July
By Colin Whitehead
Categories: Government/Business/HMRC/Industry News/Making Tax Digital

Making Tax Digital for VAT – It’s time to act

Making Tax Digital for VAT – It’s time to act

You’ve probably heard the words ‘Making Tax Digital’ or ‘MTD’ a lot since the Government first unveiled its proposals back in 2015 to make fundamental changes to the administration of tax and transition to a fully digital tax system by 2020. But, with the final VAT legislation for MTD now passed, it’s time to ensure that you are ready for this major legislative change.

From 1st April 2019, MTD legislation for VAT will become compulsory for businesses with turnover in excess of the VAT registration threshold including sole traders, landlords, trusts, partnerships, limited companies and charities. There are some exceptions but in most cases this will apply from the beginning of the first VAT quarter starting on or after 1st April 2019.  

When the rules come into play, businesses affected by the legislation must maintain certain records for VAT purposes in a digital format -not manually. VAT Returns must then be created from these digital records and submitted using software that is connected to HMRC via the API (application programme interfaces) platform which allows information to be sent and received digitally.

If you continue to use spreadsheets to calculate your VAT liability you will still have to submit this information online and the transfer of information from manual to digital entry will be time consuming and could lead to errors.

Naylor Wintersgill Director Colin Whitehead says, “The MTD legislation for VAT is coming up quickly and if your business is still keeping manual records then you’ll need to explore your MTD compatible software options as soon as possible. Even if you are already using an accounting software package, it is still important to check it can comply with the digital reporting requirements of MTD.”

Naylor Wintersgill Chartered Accountants are a certified partner to the leading cloud accounting software providers Xero, QuickBooks and Sage which all offer solutions that are compatible with the MTD rules. As a cloud accounting expert, Colin adds, “Although MTD for other taxes is not thought to be coming into effect until at least April 2020 and full details are still to emerge, it’s very much a case of when, not if, MTD will fundamentally affect the way business records are kept and income is reported to HMRC. With quarterly reporting on the horizon, we believe considering a switch to cloud based accounting software early could ensure you’re best placed to deal with the changes ahead of the deadline and should be at the top of the agenda for most SME’s right now.”

If you’re still using a manual entry system or you’re unsure if your current accounting software package is compatible for MTD reporting, then contact our experts for assistance. Our certified team can advise you on what action to take and demonstrate, with no obligations, the best accounting software solution to suit your individual requirements. Then, when you’re ready to make your move to the cloud, we’ll ensure you have support you need to make the switch with the least disruption to your business.