Six tips to plan for HMRC’s Making Tax Digital
By April 2019 HMRC’s plans for ‘Making Tax Digital’ will transform the way VAT registered businesses, including landlords, process their taxes. Clare Elsby, Business Development Director at Elsby & Co, answers the six most frequently-asked questions received on what MTD means for your future.
Q: What does Making Tax Digital mean for a VAT registered business?
A: Look at how you currently keep accounting records and decide how you are going to comply with HMRCs requirement for your information to be digitally supplied from your first
VAT return after 1st April 2019. You are already used to doing quarterly VAT returns and that part remains the same, the only change is how the information gets to HMRC.
Q: If all my paperwork goes to an accountant to prepare a VAT return do I need to do anything?
A: Your accountant will need to make changes so they can file data online on your behalf. It is likely this cost will be passed onto your business. If you only use an accountant for year-end accounts, you may need to take on an additional service for them to be able to report quarterly to HMRC.
Q: Can I use a spreadsheet to calculate VAT?
A: Yes, but the data still needs to get to HMRC electronically, so you’ll need appropriate accounting software to submit a tax return. The best solution is to get set up on a cloud accounting system and migrate away from using just a spreadsheet.
Q: I already use cloud accounting software, so am I ready?
A: All cloud accounting systems that you access by subscription will be ready for Making Tax Digital by April 2019. In fact, most should be ready before this date so businesses can volunteer for the testing phase that HMRC are starting in April this year.
Q: I’m not VAT registered so I don’t need to do anything, right?
A: Yes, for now. But the next phase of Making Tax Digital is likely to come into effect from April 2020, which will mean quarterly returns of all income and expenditure during
the financial year, and then a fifth and final return for the year once your accounts are finalised.
Q: How are landlords affected?
A: VAT registered landlords are included in Making Tax Digital and will also need to follow the new rules from April 2019.
To find out more register today for one of Elsby & Co’s Cloud Accounting Workshops at www.elsbyandco.co.uk/MTD