Making tax digital is a scheme by the UK government to make it easier for businesses and individuals to manage their taxes. The first stage comes into play on 1st April 2019 and is called Making Tax Digital for VAT.
From this date, VAT registered businesses (those companies with their turnovers over the VAT threshold, which is currently £85,000) will be required to digitally submit their tax records to HMRC. They will no longer be able to do this via HMRC’s Government Gateway.
Businesses under the scope of MTD for VAT will have to make their first MTD compatible submission for the first VAT period starting on or after 1st April 2019. If a business has a VAT accounting period that spans the 1st April 2019 start date, the return for this period won’t fall under MTD. In this case, the return for the next VAT accounting period will be the first that has to be completed using MTD compatible software.
For example, if a business’s VAT quarter runs from 1st March to 31st May 2019, the VAT return for this period wouldn’t need to be an MTD submission. The business’s first compulsory MTD VAT submission would instead be for the following quarter ending 31st August, with the VAT Return due for submission by 7th October.
Only VAT registered businesses will need to keep digital records and only for VAT purposes. Businesses will not be asked to keep digital records or update HMRC quarterly for other taxes until at least April 2020.
You can still continue to use spreadsheets to digitally record and store your business records. However, you will need to make sure those spreadsheets can digitally submit any necessary data to HMRC.
One way to do this is to do this is using an API-enabled spreadsheet. These are spreadsheets that incorporate relevant Making Tax Digital APIs. They can either:
- combine with accounting software to submit the required VAT information digitally to HMRC, and allow information to be sent back to the business digitally from HMRC
- be used to keep digital records and then directly submit the required VAT information digitally to HMRC
Alternatively there are a range of bookkeeping packages provided by companies such as Sage, Xero, Quickbooks etc. Each of these providers offer free trial versions so it may be worth having a look to get a feel for which option you believe would suit your requirements.
Clients already using bookkeeping software should check that they have an up-to-date version compliant with MTD.
Please do contact us if you would like us to obtain a price for you to purchase the software or upgrade your existing version to an MTD compatible one. It may be that we can negotiate a discount that you would not achieve by contacting your software provider directly.
We do currently provide bookkeeping services for many of our clients and can prepare and submit VAT Returns on your behalf. Alternatively, for the first year, there is the option to calculate the figures yourself and send the totals to us for submission to HMRC. If you would like to consider either of these options then please contact us to discuss in further detail and obtain a fee quote.