How do you keep your records? – Manually? On Spreadsheets? Using software? What you need to know in advance of Making Tax Digital
As we get closer to the introduction of Making Tax Digital (MTD), it is becoming increasing important for any business that falls within the scope of MTD ensure that they are ready
MTD is a Government initiative to overhaul the UK tax system. It is the biggest change of a generation. MTD commences on 1 April 2019 with MTD for VAT. From this date, VAT registered businesses above the threshold of £85,000 per annum will have to keep digital records and submit VAT returns using compatible software.
The scope of MTD will not be widened before the system has been shown to work well and not before April 2020 at the earliest.
A business that falls within the scope of MTD must use ‘functional compatible software’ to meet the new requirements. This software must be able to connect to the HMRC systems via an Application Programming Interface (API), to be compliant with MTD.
When considering what you need to do to comply with MTD, most businesses will currently fall into one of three categories.
Currently using manual records
With for a few limited exemptions, businesses will no longer be able to use manual records. Instead businesses must use “functional compatible software. Transitioning from manual records to digital record keeping will have its own challenges for each business depending upon the complexity of the records and the date they look to transition. Any business currently using manual records should look to prioritise the transition and seek professional advice where appropriate so that they are compliant from 1 April 2019.
Currently using spreadsheets
HMRC has advised that most businesses can continue to use spreadsheets for record keeping but these spreadsheets must be combined with compatible software which is capable of connecting to HMRC systems via an Application Programming Interface (API), when making a submission to HMRC.
Currently using software
If you are currently using software, you should ensure that the software which you are using is MTD compatible. If it is not compatible, you will either need to upgrade the software or purchase new software which is compatible.
What you need to do?
Regardless of how you are currently maintaining your accounting records, its critical that you address this now so that you can be compliant from 1 April 2019. Failure to be compliant will result in fines and penalties which can be avoided if you act now.
The choice over what to use will depend on several factors such as cost, ease of use and the features that the software provide. We work with major software providers and can identify what software would be best for you. In most cases, we provide our clients with the software free of charge so there is no increased costs for a business in purchasing new software.
If you would like any advice or wish to discuss MTD in more detail, please do not hesitate to contact us on 0161 952 4244.