HMRC have confirmed that MTD for business will become mandatory, starting with MTD for VAT from 1st April 2019.
What is MTD for VAT?
All UK businesses which are VAT registered and have a turnover above the £85,000 VAT threshold will be required to maintain digital records and submit VAT returns to HMRC using MTD-compatible software from 1st April 2019.
Businesses with a turnover below the VAT threshold will not have to operate MTD at that time, but can choose to do so voluntarily. The current plan is that these smaller businesses will have to comply with MTD for VAT reporting “not earlier than April 2020”.Reporting for other taxes under MTD (e.g. corporation tax) will also not happen before April 2020 – HMRC has pushed back MTD implementation dates a few times so watch this space.
What does this change involve?
It is increasingly common for businesses’ records and accounts to be kept digitally, whether it be in the cloud, using software on a computer or tablet, or even stored in an app.
The difference that MTD for VAT is bringing in is that the software itself must be capable not only of recording and preserving specified records, but also of preparing your VAT Returns using the information it is storing AND communicating with HMRC digitally via an API platform.
What will this achieve?
Upon commencement of MTD for VAT, HMRC’s expectation is that tax recording will be more accurate with less opportunity for errors and fraud. The process should be faster and more efficient for businesses, accountants and HMRC alike. Time is valuable!
What software will be compatible?
HMRC is working with more than 150 software suppliers who have said they will provide compatible software for MTD with VAT in time for the April 2019 launch.
One of those suppliers happens to be the software we specialise in here at RBL. Xero is the UK’s leading online accounting platform and was named “Britain’s Best Small Business Accounting Software” by Accountancy Age.
Xero have already demonstrated their software to HMRC and it has been tested in their MTD for VAT test environment.
Aside from the benefit of being MTD compliant, Xero has everything you will need to run your business effectively and efficiently. Some of the impressive features that Xero boasts include:
- A dashboard displaying your key, real-time financials;
- Automatic synchronisation of your bank statements & management of the accounts from any device;
- Take payments directly from your sales invoice;
- Store digital copies of all of your receipts & invoices alongside the digital transaction – say goodbye to the shoebox/lever arch file;
- Hit the road and manage your business on the go with the Xero mobile app. Invoice customers, pay bills & staff, see your cashflow in real time;
- Unlimited user access for free; and
- Secure data storage in the cloud, no need to worry about losing it!
If you would like to see Xero in action simply contact the RBL office and one of our team members will be happy to give you a demonstration. Many of our clients love using Xero to manage their bookkeeping, and you can too!
What are RBL doing to prepare for Making Tax Digital?
Over the coming months, we will be working hard to make sure all of our clients will be MTD compliant. For those already using Xero, this should be a relatively painless process, for others more work may be required.
Many businesses will need to make a decision soon about their accounting software to avoid non-compliance!
We are here to help and happy to discuss your business arrangements. Get in touch with the RBL team on 02895 320155, or email us at email@example.com.