Making Tax Digital (MTD) for VAT is coming whether you like it or not. With the first launch date less than five months away, it’s time for businesses to lay the groundwork.
According to a recent survey by Sage, 73% of those asked said they didn’t feel prepared for Making Tax Digital at all. So what can you do to ease the transition into unknown waters?
Know whether you will need to file – and when
While information has been sparse and changeable over the last year or so, we now know for sure that businesses who are registered for VAT with a turnover above £85,000 will be required to keep digital VAT records and file returns online using compatible software from April 1st 2019. This is estimated to affect around 1 million businesses.
As always, there are some exceptions. Businesses with complex needs grumbled to HMRC about the transition, and the rollout of MTD for these companies has been deferred for a further 6 months. Around 3.5% of MTD-mandated businesses fall under this umbrella. These include: charitable trusts, ‘not for profit’ organisations that haven’t been set up as a company, local authorities, public corporations and traders overseas – amongst others! These businesses will not be required to file VAT records online until 1st October 2019.
Check out the government’s official guidelines as to whether you fall under the 3.5% of businesses that will be deferred.
Decide which software you’ll use
There is an extensive and ever-updating list of official HMRC-compatible software for MTD. The one you choose will depend on a myriad of factors including the size and complexity of your business, whether you want paid-for or free software and how comfortable you are with having your accounts in the cloud. Take some time to choose the best one for you and get acquainted with how it works.
Of course you might already be using well-known accounting software such as Quickbooks (our personal favourite) – in which case you get to feel a bit smug at this point.
Iron out the kinks
Now is the perfect time to take a good look at the specifics of your VAT dealings and have a good spring (or autumn) clean. Are your processes needlessly complicated? Are you pulling information from a multitude of sources? Making the flow more efficient now will save you time and frustration further down the line. If it’s not already digitised somehow, start.
Some available MTD-compatible software will allow bridging between Excel spreadsheets and the filing process, which means if you have a well-organised system in place ahead of time, the changeover is going to be much simpler.
Join the pilot
For many businesses, you don’t have to wait until you’re forced. HMRC have just launched their MTD pilot scheme for businesses with ‘up to date and straightforward’ VAT dealings (which covers around half a million companies). Signing up to the pilot scheme will let you practice until you’ve got to grips with the new system.
Those businesses that are not-so-straightforward – including businesses on the flat rate VAT scheme, those who trade with the EU or are based overseas and newly registered businesses amongst others will be invited to join the pilot scheme in the coming months.
And those 3.5% of businesses who are deferred (as we mentioned earlier) can join the pilot in April 2019. For a full timeline with eligibility criteria, check out the table here.
By being prepared ahead of time you’ll avoid last-minute confusion and hopefully enjoy a super-smooth transition with no effect on your business.
If you want to take the hassle out of Making Tax Digital, we’re on hand to help. Give us a call today.