What MTD means:
Making Tax Digital (MTD) is the latest change to the method by which businesses must keep and administer their accounting records.
Initially MTD for VAT will require VAT registered businesses with taxable turnover above the VAT registration threshold to keep records in digital form and file their VAT Returns using software. Many businesses already keep their records in a digital way, but these can be in a wide variety of formats. MTD will require that software be capable of maintaining the records specified in the regulations, prepare their VAT Returns and communicate with HMRC digitally via their Application Programming Interface (API) platform. VAT Notice 700/22 provides a list of the specific records which need to be maintained digitally.
How will it affect you?
For those initially affected by the new regulations, MTD will come into effect for the first VAT Return period starting after 31 March 2019. The major software suppliers (Quickbooks, Sage, Xero etc) have already updated their packages to become MTD complaint but you will need to ensure that the version you are using includes that update. If not, you will need to upgrade to the latest version. For those currently using manual records, it will require a fundamental change to the way in which the business keeps its records and will require some careful planning to make sure a new system is implemented correctly. In some cases, it will still be acceptable to use spreadsheets to record information but there will need to be an additional means of communicating with the API.
How can we help you?
There are a number of ways we can provide assistance to the business in order to ensure it is fully compliant in good time for the start of MTD:
- Determine when MTD will apply to the business, especially for developing businesses nearing the VAT turnover threshold
- Assess current bookkeeping for suitability
- Advise on additional requirements of the system
- Provide demonstrations of alternative accounting software systems
- Assist you in making the best choice for the way forward
- Provide a bookkeeping and VAT Return service for those looking to avoid the additional administrative burden of operating a new system
If you would like to discuss MTD further or have any particular concerns, please do not hesitate to contact us.
December 6th, 2018