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Making Tax Digital – Are You Ready?

The government are committed to moving the tax system to a digital platform for virtually all tax compliance, and they believe this will make it easier for individuals and businesses to get their tax right and keep on top of their affairs.

The initiative is designed so that real time information flows into the taxpayer’s Digital Tax Account, meaning all the information about your income from employers, banks and investments, etc. will be reported digitally and held in one place. This will eventually dispense with the need for an annual tax return and allowing for in-year tax estimates.

MTD for VAT first!
The first step towards digital tax happens on 1 April 2019 for VAT registered businesses and landlords, with turnover of more than the VAT threshold of £85,000.

If you meet this criteria, then It will be mandatory for you to maintain digital records and file your VAT return digitally with HMRC.

However, if your turnover is below £85,000 it will not become mandatory for you to become part of MTD until at least April 2020.

What you need to do

If you already use a software package to keep your business records, then the likelihood is you will be ready to comply with the MTD when it starts. If you haven’t heard from your supplier about MTD, it would be worth contacting them to make sure they will be ready.

Unless you are using the latest version or are using cloud-based accounting software it is likely that you will need to update your software to the latest version to obtain the MTD functionality, so don’t delay.

If you use spreadsheets to keep your business records, then HMRC have said that spreadsheets will be acceptable provided they deliver the details required and are electronically integrated with an API which communicates with HMRC.

At present no-one has created an API for this purpose, but the expectation is that someone will do so sooner or later. However, it may be better to take this opportunity to move to traditional software rather than staying with spreadsheets.

Manual records
You must move to digital records when MTD starts.

MTD is not just about filing information online, it is a statutory requirement to keep digital records for your business.

Keeping digital records is not as daunting as it seems but please get in touch as soon as possible to start the process of software selection and implementation before it becomes compulsory.

MTD for accounts
Although not expected until at least April 2020, the existing practice of preparing end of year accounts will continue. Businesses can still choose their accounting date and an end of year statement will be required to finalise the tax liability for the tax year. The tax rules are not changing – the tax liability will still be based on the end of year figures and not on quarterly submissions.

MTD for self-assessment
The policy direction is that, in time, Self-Assessment tax returns will disappear being replaced with online submission of income direct from your bank, employer, etc. 

However, this is not expected until at lease April 2020 at the earliest, so we will be filing annual tax returns for a while yet!

How can we help
We are fully up to speed on MTD so are well placed to help you with the decisions you need to make, and the implementation of software and systems required to comply with these new regulations. We can also assist you with updating your existing software or switching to new software.

Alternatively, you may want us to take away all the hassle of MTD and provide you with a bookkeeping service. Outsourcing your record keeping to us can be a positive solution, particularly if you have limited access to the internet.

Please give us a call to discuss this further.

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