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15th November, 2018
Making Tax Digital – Getting Your Business Ready
Making Tax Digital is an initiative designed to make the UK’s tax system more efficient by bringing it into the digital age. Ultimately, it is expected to apply to a range of different taxes, including income tax, corporation tax, and VAT.
While Making Tax Digital for income tax and corporation tax will not be rolled out until at least April 2020, big changes are on the horizon when it comes to Making Tax Digital for VAT, which will be mandated from 1 April 2019.
Find out if your business is impacted below.
What are the new requirements under Making Tax Digital for VAT?
If your business is VAT-registered and has a taxable turnover in excess of £85,000 (the current threshold for VAT registration) then it is highly likely you will have to comply with Making Tax Digital for VAT.
Businesses that are VAT-registered with taxable turnover below the VAT registration threshold will not automatically fall into the Making Tax Digital for VAT regime, although they can opt-in if they choose.
Making Tax Digital for VAT will place several new requirements on businesses. The main changes that you should be aware of are as follows:
• Recordkeeping – businesses will have to keep digital records and store these records for six years; and
• Filing – VAT returns will have to be filed digitally using software that is compatible with the Making Tax Digital platform.
How can I make sure my business is ready for the changes?
As there are only a few months left to get ready for Making Tax Digital for VAT, businesses that are required to comply with the new regime should prepare for the upcoming changes now. There are several ways that businesses can do this:
Review existing recordkeeping processes
There are lots of businesses out there that currently use and store paper-based records. While this may have worked well in the past, your business will need to transition to digital records to remain compliant with Making Tax Digital for VAT.
This process will likely cost both time and money, so the sooner any changes can be introduced the better.
See if your software is compliant
HMRC will not be providing free software for Making Tax Digital, so you’ll have to use commercial software to submit your VAT returns under the new regime.
However, not all software providers are compliant with the Making Tax Digital platform, so it’s vitally important that you check with your existing provider whether they will be prepared for Making Tax Digital for VAT when it launches.
For additional peace of mind, HMRC has also published its own list of recognised providers, which you can view here.
Determine which VAT period will be the first to fall under the new regime
If a business is within the scope of Making Tax Digital for VAT, then the new digital filing and recordkeeping requirements should apply to that business’ VAT periods beginning on or after 1 April 2019.
However, HMRC has announced that the launch of Making Tax Digital for VAT will be extended for those with more complex VAT requirements, such as unincorporated not-for-profit organisations. For those entities, the new requirements will come into effect in respect of VAT periods beginning on or after 1 October 2019.
Stay up to date with information from HMRC
There is plenty of information online about Making Tax Digital for VAT, but one of the best places to find answers to your questions is through HMRC’s website. In particular, HMRC has released a helpful stakeholder communications pack, which can be found here.
Where to get further help
As there is limited time left to get ready for Making Tax Digital for VAT, it’s best to act quickly when arranging your business’ transition to the new regime, and to seek assistance if you are unsure of your new requirements.
If you need any further advice, speak to a member of the team at Advantage Accountancy, on 029 22 331169 who can provide further assistance.