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What is MTD (Make Tax Digital) and how does it affect your business?

MTD is the abbreviation for HMRC updating their VAT rules and it takes effect from April 2019.  Basically, this means that any company with a turnover of £85,000 or more who are VAT registered must submit their returns through a certified system. So, it will no longer be acceptable to file your returns (if you fit into this category), using the HMRC online VAT return system, as you have previously done.

The reasons that HMRC have decided to make this change is to ensure that tax recording is more accurate and therefore providing fewer opportunities for errors and miscalculations, whilst making the process faster and more automated for business, accountants and HMRC – to help save valuable time all round.

So where does this leave you?  Perhaps you are the type of person who has been using spreadsheets for years and really don’t want to change, or maybe you just hand everything to your accountant once a month and let them deal with it, or maybe your partner does what they can, but it doesn’t give you a proper handle on how your business is doing.

The idea of embracing some new technology and quite often a new way of working can often seem daunting too, especially when you are busy with all the other elements of your business.  The whole record keeping part of your business can easily become time consuming and frustrating with a minefield of terminology and accountants speak to get your head around.

So, if you know that MTD applies to you and you need to make the change to using MTD software to submit your VAT returns, here are some tips on making the transition: –

 

  1. Choosing your software
  • Research the market, what is available, and what will best suit your needs.  Do you need a mobile app, will your bank account connect to the software for automatic updates etc?
  • Can you transfer existing data to the new system and how easy is it to do this? – (Some software companies will do this for you, depending on the format of your data)
  • What are the ongoing costs and the cancellation policy, should you need it?
  • What happens to your data should you no longer want to pay the fees etc?
  • What training and support is offered, how easy is it to understand and how accessible is it?
  1. Setting up your new system
  • Work through the training offered, even if it is time consuming this will save you time in the long run.
  • Think about the type of information you would like to see in your reports and what is important to you.
  • Check that you are coding things correctly and if you are not sure, take advice from a professional
  1. Ongoing
  • Update your accounts regularly, don’t leave it until the end of the year.
  • Copy your receipts either to your computer or a photocopy – shop receipts fade quickly
  • Check your data, make sure the figures make sense
  • Submit your returns in plenty of time.

We hope this helps, but if you would like to talk through MTD in more detail, please contact us at the Paperwork Team.

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