With the deadline to ‘Making Tax Digital’ quickly approaching, we want to help ensure our businesses are supported and ready for the change.
We asked Peter Coleby of DSG Chartered Accountants to answer some of the most pressing questions around digital tax and how businesses can best prepare themselves.
Digital Tax is due to go live on the 31st of March. What should businesses expect?
A VAT registered businesses with an annual turnover of £85,000 or more will be required to submit VAT returns digitally to HMRC for any VAT periods commencing after this date. This will be either directly from accounting software or through a bridging solution (usually an API enabled excel spreadsheet).
HMRC’s online portal which many businesses currently use to submit VAT returns will cease to exist for VAT submissions.
All underlying records that form the VAT return should be recorded digitally. Paper books and records will become a thing of the past.
How will a business know if they are HMRC ready?
Businesses can check if their software is compatible by reviewing HMRC’s list of MTD ready software: https://www.tax.service.gov.uk/making-tax-digital-software
It is up to the directors of each business to review their own processes and ensure they comply with HMRC’s rules regarding digital record keeping.
If a business is confident that they are MTD ready, then they can join HMRC’s VAT pilot scheme and start submitting digital VAT returns immediately. This can be accessed and activated from within your current HMRC VAT portal.
What cost could a business (or individual) incur for the change?
For some businesses or individuals already using MTD compatible software, the cost will be minimal.
For businesses with manual records, there will be an extra cost for software, as well as implementation and training costs. However, there are fantastic cloud-based bookkeeping solutions available for a small monthly subscription that could provide the business with time saving efficiencies and better information, as well as being MTD compliant.
For some larger more established businesses the costs may run in to the thousands. They may have relied on purpose built bespoke software for a long time that can no longer be developed. Or they may be forced in to an expensive server upgrade project in order to be able to install the latest version of current software. But again, there are alternative cloud-based software’s with available Apps specific to the business process which could improve efficiencies and save costs.
Will this take more time?
If you currently maintain all records digitally and have MTD compatible software then the process will actually be quicker. Instead of logging on to HMRC’s portal and typing in the figures for your 9 box VAT return, you will simply click a button once to submit directly from your software to HMRC.
If you haven’t previously maintained digital records then there will have to be some initial time invested to setup your software and processes correctly to ensure you are compliant, but once you are up and running it should be a straight forward process each quarter.
How can a business best prepare?
- Review your software and check whether it is/or will be MTD compliant.
- Review your bookkeeping processes to ensure you are compliant
- Read up on HMRC’s VAT Notice 700/22: Making Tax Digital for VAT https://www.gov.uk/government/publications/vat-notice-70022-making-tax-digital-for-vat
- Speak to DSG