Making Tax Digital (MTD) is being implemented by HM Revenue & Customs from 1st April 2019. However, for many businesses the real switch over date is much sooner. This brief article explains why you should be thinking about MTD now and how Rawlinson Pryde & Partners can assist you.
Who has to comply with Making Tax Digital?
Any VAT registered business which has a turnover in excess of the VAT registration threshold (£85k for 18/19) will need to comply with Making Tax Digital. This may mean businesses will need to implement major changes in the way they keep their bookkeeping records. The manual entry of VAT Return data on the HMRC website will cease to exist. You will have to use a computer software package to upload the relevant figures.
What happens if you are below the Making Tax Digital threshold of £85k?
If you are below the £85k threshold, you may think you do not need to worry. However, if your business is growing and you believe it will be over £85k in the next accounting period you should consider obtaining compliant software early.
Remember that you will need to keep an eye on the business’s rolling 12 month VAT turnover. When your business breaches £85k you will fall within the Making Tax Digital regime and have to comply until de-registration.
What happens if your turnover dips below the threshold?
Once you are in the Making Tax Digital regime for VAT your business will have to remain until it de-registers for VAT. This means even if business turnover decreases to below £85k you will still have to follow the Making Tax Digital reporting requirements.
How to comply with Making Tax Digital?
In order to comply with Making Tax Digital, businesses need computer software such as:
- SAGE One Accounting
- Kashflow
- FreeAgent
- Xero
- Quickbooks
The use of Excel and manual books before entering the figures on to HMRC manually will no longer be an option!
When to switch over to comply with Making Tax Digital?
There are 2 options on when to switch over.
- When you have to comply which could be your 1st VAT quarter period beginning on or after 1st April 2019
- The beginning of your 1st accounting period which crosses over the switch over date.
At Rawlinson Pryde & Partners we are encouraging our clients to switch over at the beginning of your 1st accounting period which crosses the 1st April 2019. This may mean you will be using the software potentially from 1st July 2018.
Why switch over earlier than I have to?
Some business owners are wondering why they should switch over and pay for software earlier than they have to. There are several reasons, but mainly these are cost savings and compliance.
- If you wait until the 1st of April you may end up with 2 sets of data. Your accountant will need to use both to prepare your accounts. This is likely to add cost to your annual compliance fees.
- If you wait you may wish to avoid these costs by entering on the manual data on to your software package. However, this will mean you are duplicating your work.
- As soon as your turnover breaches the £85k mark on the rolling 12 month basis you will be required to register. This comes back to the 2 sets of data issue again.
- Complying early will give you more time to get adjust to the software and how to use it. This will mean when the compliance date arises you won’t have lots to learn in a short period of time.
How to Prepare?
One thing we at Rawlinson Pryde & Partners are advising our clients to do to help prepare is to ensure your VAT quarters tie up with your year end. For example if your business has a May year end but your quarter ends at the end of March, you will have to comply for Making Tax Digital on 1st April but have an overlap of your year end. Therefore to make things cleaner by moving the quarter end date to May, means your 1st compliance period will be from 1st June 2018.
What happens if this sounds too much?
Rawlinson Pryde & Partners have employed 2 specialist bookkeepers who will be able to:
- Carry out your bookkeeping duties either in our offices or at your premises.
- Assist you with any queries you may have with the software you are using.
- Provide training on how to use the software.
If you would like more details on how we will be able to assist you, please feel free to contact us.
How to prepare for Making Tax Digital?
Rawlinson Pryde and Partners are being proactive regarding Making Tax Digital. We sent a 7 page letter to our affected clients and are holding a seminar with SAGE in attendance on 29th May. SAGE will demonstrate their software and along with us will answer any queries regarding Making Tax Digital.
If your accountant is not being as proactive as Rawlinson Pryde & Partners we would be delighted to hear from you and we will invite you along to the seminar.
The Institute of Chartered Accounts for England & Wales (ICAEW) which regulates Rawlinson Pryde Limited has published this summary of MTD and what we know.
If you wish to speak to a member of our team, please contact us.
