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[11.07.2019]

Making Tax Digital – Are you compliant?

As of 1st April this year, Making Tax Digital became mandatory for all businesses over the VAT threshold. A VAT registered entity with a June 2019 quarter end is now required to submit their VAT returns under the MTD regime using either a software application or bridging software. Keeping your book-keeping correct and up to date becomes particularly important, but the technology brings big benefits in terms of real-time information. You can see your accounts at a click of a button and check on your profitability. And if you code everything correctly and keep the data accurate, it’s possible to produce very useful forecasts too.

In many respects, the Making Tax Digital regime is a great opportunity to become more business savvy and experiment with the power of cloud accounting. After all, if you had a loss-making product, wouldn’t you want to know about it straight away? That’s exactly the kind of thing that’s possible with one of the commercially available packages, but there are many other benefits too, including the linking of receipts to expenses, the elimination of paperwork and access to your accounts via a smartphone or tablet.

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?

Is my software MTD compliant?

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.

For any queries regarding Making Tax Digital or your accounting needs contact us for more information.

 

Andrew Clifford

 

 

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