Since April 2019, if you run a VAT-registered business and exceed the VAT registration threshold of £85,000 turnover, then you should be keeping digital records and using MTD-compatible software for sending VAT returns to HMRC.
Luckily, if you are already VAT-registered, ICS will ensure you are set up for Making Tax Digital without you needing to worry. We work closely with FreeAgent cloud accounting software to ensure accurate reporting and ease of use for our contractor clients.
What’s it all for?
HMRC estimates that the exchequer is losing out on up to £10 billion a year due to avoidable mistakes. Keeping digital records increases the accuracy of these records and enables the user to send the details directly to HMRC, avoiding any transposition errors.
HMRC hopes to become “one of the most digitally advanced tax administrations in the world”, improving the efficiency and effectiveness of filing tax returns and reducing the burden of paperwork on businesses.
Who does it apply to?
Initially Making Tax Digital only applies to VAT-registered businesses with qualifying sales above the VAT threshold of £85,000. It should be noted that none of the deadlines for sending returns or making payments have changed.
There are exceptions for businesses with more complex requirements including “trusts, ‘not for profit’ organisations that are not set up as a company, VAT divisions, VAT groups, local authorities, public corporations, traders based overseas, those required to make payment on account and annual accounting scheme users”. These businesses will have been informed by HMRC that their deadline is deferred to October 2019.
If your business isn’t making over £85,000 in VAT eligible sales that doesn’t mean you can’t start filing your returns through MTD, eventually all businesses will be required to keep and send digital records so it’s never too early to start. If you need advice on registering early for MTD then please contact your accountant and they’ll be happy to help.
How do I sign up to MTD?
As authorised agents, ICS sign you up for MTD and will make sure everything is in place before your next VAT return is due. So there is nothing for you to worry about!
What software is MTD-compatible?
There’s a plethora of accountancy software on the market and it can be a bit of a headache choosing the one that works for you. Many businesses still rely on a primitive spreadsheet but unfortunately a spreadsheet alone won’t be MTD compatible. To continue using a spreadsheet you’ll also have to use bridging software (a digital link that can transfer data from the spreadsheet over to HMRC). This can be a laborious process as the spreadsheet has to be formatted correctly and won’t fulfil the other requirements of MTD; digital record keeping and maintaining a link between your records and HMRC.
To be fully compliant with MTD for VAT, you’ll need to use accounting software that both stores your records and can automatically submit returns to HMRC.
For our limited clients we provide access to FreeAgent, included as part of our fixed monthly package. FreeAgent have been working closely with HMRC in the pilot stage of MTD and have been successfully submitting VAT returns digitally for 8 years. On top of this, their mobile app makes bookkeeping easy as you can update your records while you’re out and about, syncing instantly with your accountant so they can be working with the most up-to-date figures whilst you get on with running your company.
If you have any questions related to Making Tax Digital or the use of cloud accounting software, please don’t hesitate to contact your accountant.
If you’re not yet registered with ICS, call our new business team on 0800 195 3750 or email email@example.com to get started.