Are You Ready For Making Tax Digital? 140

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The HMRC launched a pilot for a new online VAT service last month, inviting more than half a million businesses to try it before it is rolled out to all businesses on 1st April 2019.

What is Making Tax Digital (MTD)?

If you haven’t already heard of Making Tax Digital it is a government scheme with the aim of making it easier for both individuals and businesses to submit their tax returns and stay on top of their finances.

HMRC hopes these changes will make the tax system more effective, efficient and easier for tax payers to get their VAT submissions right.

These initiative only covers VAT to begin with, however, there are plans to roll it out for other taxes in the future.

Who will have to use the new system?

From 1st April 2019, all VAT-registered businesses with a taxable turnover above the VAT threshold of £85k will be required to use the MTD service to keep records digitally and submit their VAT returns online using compatible software.

What are the benefits?

Using a new system for something as complex as tax can be a scary prospect, however there are many benefits to the initiative.

  • You will be able to see your tax balance online before the year end which will help many businesses prevent errors in advance.
  • The central system will allow you to see all your tax information in one place, including liabilities and entitlements.
  • You will be able to access your tax information from any device any time you want, as all information will be stored in the cloud.
  • Cloud-based storage avoids issues with data going missing, or files and receipts getting lost.
  • Easy access and visibility of your tax liability every few months will help to reduce the risk of being hit by any surprise tax bills.

What do you need to do to get ready?

April 2019 is still five months away so don’t panic, you have time to get your business organised for the changes.

If you currently use accounting software, you will need ensure that it is MTD compatible since HMRC will only accept VAT returns provided by a software package supporting Making Tax Digital for VAT.

Many accounting software providers are working closely with HMRC to have their MTD functionality ready for April 2019, so it’s worth checking with yours in advance to make sure they will be compatible.

If you keep all your records on paper then we recommend that you start moving everything to an online accounting package now. Manually entering your VAT figures into the HMRC portal will not be permitted after 1st April 2019.

Sign up to HMRCs online services now so you can submit your next VAT return online. You will need to get a User ID and password, which is sent out by post, to use the service.

An accountant or bookkeeper can help you get your records organised and onto a new system, especially if the thought of using new cloud-based software is a bit daunting. If you think you may need some help to get ready for 1st April 2019, get in touch with Magpie Accountancy today – we will be happy to talk you through the process and how we can help.

 

 

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