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Is Your Accounting System Making Tax Digital Compliant?


We are now less than three months away from Making Tax Digital for VAT. If you have not already done so, now is the time to ensure your accounting systems are fully compliant with Making Tax Digital (MTD). This will help to ensure a smooth transfer to the new way of reporting to HMRC.

What is Making Tax Digital?

Making Tax Digital is part of the government’s plan to make it easier for businesses to stay on top of their day-to-day accounts. HMRC wants to be one of the most digitally advanced tax administrations in the world – improving efficiency, effectiveness and ease of compliance. Preparation starts now, with businesses and accountants moving to improve efficiency, boost profitability and make the transition painless.

From April 2019 VAT registered businesses with a turnover greater than £85,000 will no longer be able to logon to the Government Gateway and manually submit VAT returns. Instead returns will be uploaded via ‘functional compatible software’ each quarter. So how do you know if your current accounting software is compatible?

MTD compatible software

Firstly when MTD comes in you will no longer be able to maintain manual records if you are currently doing so. From April 2019 those spreadsheets will need to be able to interact with software in order to meet the requirements of MTD via ‘bridging’ software. For those using hand written ledgers, the change is even greater.

If you are using desktop accounting software, such as Sage, we would advise checking the version you have is compliant. Some of the older Sage versions are not MTD compliant and will need to be updated to newer versions. Alternatively you can transfer your records to cloud accounting software such as Xero, QuickBooks or Sage One. As a general guide with Sage if you have recently upgraded your software to a subscription-based product such as “Sage 50 Cloud Accounts” or “Sage Business Cloud Accounting” you should be MTD compliant. However if you are any doubt or are not regularly updating your software please contact us for advice.

If you are using an alternative accounting software provider we would advise contacting your software provider urgently to check if the software version is MTD compliant.

What you need to do next

HMRC are currently consulting on a new penalty regime for non-compliance with MTD. Penalties may be substantial and you cannot afford to do nothing, so please act now to ensure you are fully compliant by April 2019. Do not assume your accounting software is MTD compliant, confirm this now so you are able to take action if your current software does not comply.

We recommend cloud accounting software to our clients. This software meets your MTD compliance requirements, whilst also providing a host of additional benefits to you and your business. Benefits of cloud accounting software include providing your business with valuable up-to-date financial information and saving you time on data entry, invoicing and credit control. Read our earlier blogs on the benefits of cloud accounting and contact us for a demo where we can advise on the best systems for you and your business and guide you through the process.

Andrew Clifford



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