Are you MTD Ready? Making Tax Digital
If you’d like some help with MTD, read on!
MTD stands for ‘Making Tax Digital’. An HMRC initiative, they want individuals and organisations to do their accounts on computer software that will link to theirs. This more streamlined approach should make paying taxes more efficient both for you and for them. In fact, HMRC intends to become ‘one of the most digitally advanced tax administrations in the world’ with this new service.
Not that long ago, HMRC announced that MTD would be mandatory by 2018. At the time, many businesses were concerned about finding the right software, implementing it and being ready in time. Thankfully, HMRC listened to their concerns and extended the deadline to April 2020.
One exception is for the submission of VAT returns for businesses with a turnover of over £85,000. In those cases, you need to be MTD ready by April 1st2019. In other words, now! Hopefully, you’ve already got your software installed and running to submit your first VAT return digitally direct to HMRC, using this new system. There is a deferral group who doesn’t need to be ready until October 2019 – check here to see if your business is in that group.
What happens next?
The rest of us need to be working towards investing in compatible software to be MTD ready by April 2020. Thankfully, earlier this month (March 2019), the Chancellor of the Exchequer-announced in his Spring Statementthat: “… The focus will be on supporting businesses to transition and the government will therefore not be mandating MTD for any new taxes or businesses in 2020.”
Installing and getting used to the new digital system may take some time, but in the long term it should save you a lot of time – your accounts will be submitted direct to HMRC far more quickly and easily. Also, the new system should help prevent any costly tax payment errors that easily happens in more traditional accounting methods.
What you must do:
- The first thing you must do is to register on the HMRC website to be MTD compliant.
- Then check the HMRC recommended bridging software, which will link your Excel spreadsheet to the HMRC portal. You will, of course, need to transfer your manual records onto Excel first.
- Some PC based accounting software systems can export your VAT returns into Excel, which then enables you to use the bridging software to submit the returns digitally to HMRC.
- Many of the cloud based software packages – for example Xero, Quickbooksor Sage Cloud– can be set up to submit returns digitally. There is a massive amount of software available online; the ones listed here are some obvious ones, but others may better suit your business.
What not to do after April 2020:
- Write up your accounts in manual ledgers, and then go into your Gateway on the HMRC website and type in the VAT figures.
- Use a spreadsheet to keep your records, and then enter the figures on the HMRC Gateway as above.
- Use accounting software that cannot link to the Cloud.
The HMRC have provided a lot of very helpful information on their website. But there is so much to wade through that you may not easily find what you need for your business. So if you need some down to earth help in making the change to MTD, do get in touch. Either ring 07771 538753, or email me be clicking here.
Or follow me on:-