With Making Tax Digital for VAT coming for many VAT registered businesses from April 2019, many people are asking the question, what is it and why haven’t I been told about it?!
For many businesses that are VAT registered and over the VAT threshold, they will go in to Making Tax Digital from April 2019. There are some exceptions set out by HMRC to this deadline, which will be delayed until October 2019 and includes;
- Unincorporated charities
- VAT divisions & VAT groups
- Some public sector entities
- Public corporations
- Traders based overseas
- VAT traders who use annual accounting
For many other businesses that are both VAT registered and over the VAT threshold, they will go in from April 2019. Which begs the questions, why don’t many people know about it? We have been writing to clients to let them know about the changes since April and posting updates online here;
Whilst HMRC have been Tweeting about Making Tax Digital, there seems to have been little time spent on informing those businesses that are affected by the changes. We expect that HMRC will be writing to businesses affected by the changes at some point soon! The ICAEW found in research carried out in July 2018 that just over half (51%) of all UK VAT registered businesses had heard of MTD for VAT which means that around 49% had not heard about Making Tax Digital for VAT, which is very worrying.
When Paul Lewis from Money Box tweeted about the Making Tax Digital changes the responses included comments such as “I thought this had been delayed” and “I think the changes will be scrapped.”
Whilst we do not agree with the changes being compulsory for all businesses, as we feel that some businesses will not benefit as much from using software, whether we like it or not, businesses have to work to the deadlines set out by HMRC. If you go in to Making Tax Digital from April 2019, there will be no option to file a VAT return online to HMRC, it will need to be done through compatible software. The issue is navigating through the software available if you have never used any.
Of the software available, we have been recommending software to clients that suits their needs. For some businesses that may be Xero, Sage, or QuickBooks, and for others it may be bridging software that takes figures from spreadsheets and imports the figures in to the bridging software (although this is not as straight forward as it sounds, as template software is used which must be filled out in a set way).
There are some benefits for many businesses in using software. It can help to keep the record keeping more up to date, to enable you to review figures in the year such as;
- Profit and Loss – this can help to plan and budget and to set some money aside for tax liabilities.
- Management Accounts – to enable you to review figures for specific projects, jobs, periods, or services in the year to see how much profit is being made and a breakdown of the cost involved.
There are some other benefits with using software which will vary from business to business. Our best advice to any businesses that will go in to Making Tax Digital from April 2019 is to look at all available software. Try the free trials on software to see how the software works. Start preparing now for the change, so that you are prepared and ready for it when it comes in.
For any businesses that do not know what the next step to take is, we can discuss any software options with you. Whilst we are against the changes, we feel that is important to make the most of any benefit that the software offers to you and we can help to explain these benefits to you.
Please feel free to get in touch with us if you have any questions on Making Tax Digital.