What Do Businesses Need To Know?
Making Tax Digital (MTD) is a HMRC initiative to help make it easier for businesses to get their tax right. Ultimately, MTD will affect every business and companies need to understand how a business can prepare for each stage of the MTD roll out.
Stage one of the initiative begins on 1 April 2019. VAT registered businesses, with turnover above the VAT threshold (currently £85,000) will have to submit their tax records digitally and provide their VAT return information to HMRC through MTD compatible software. Submitting VAT returns through HMRC’s Government Gateway will no longer be possible.
Stage two will roll out in April 2020 where the remaining VAT registered companies (those voluntarily VAT registered and those with VAT-able turnover under £85,000) will need to submit their VAT returns using a compatible software.
Eventually, after a successful roll out of MTD for VAT, all trading companies, sole-traders, landlords and partnerships will need to use MTD software to keep a digital record of financial transactions.
Business owner’s need to decide whether their business will be impacted by stage 1 of MTD. If it’s clear that the business will be affected, then they need to consider how much impact there will be. It’s also important to consider getting a better understanding of the changes if a business is approaching the VAT threshold or if they’re new and growing. Taking a proactive approach in understanding the changes and potential impacts will ensure they’re not surprised or left in the dark when the time comes.
If a business is already using accounting software, then the change may not be so disruptive. It may be a simple process of using the software’s update features to continue processes similar to how they do it now, by simply submitting the results through the software.
Companies may currently be using old or out-dated accounting software that will never be compatible for MTD. The company’s provider will be able to update them on their processes but it’s important to look at other software options, such as OGL’s prof.ITplus business software solution, that will work with a business’ processes and allow them to submit tax returns using the new MTD approach.
If they currently submit tax returns in a manual, paper process or with spreadsheets then they’ll need to consider ways to replace the existing process with a digital approach that will allow them to submit tax records through software compatible with MTD.
