Many business owners and accountant will already be familiar with the process of submitting tax returns, however they may not be familiar with digital tax compatible software’s that will now be a compulsory part of MTD for VAT.
Some businesses may panic as the go-live date fast approaches and they are not fully prepared for the change. There may be questions you have that are still unanswered or may have come across some hurdles. We’ve put together this helpful blog to remind you of a few things you should consider to make your transition to digital tax as smooth as possible.
Is Making Tax Digital Relevant To Me?
Every VAT-registered business within the UK that has a taxable income above the VAT threshold of £85,000 will be affected by the MTD initiative.
Smaller firms with turnovers below this limit can either opt in to the system voluntarily or continue with their manual record keeping. If your company is presently below the threshold but you think your earnings will rise in the coming financial year, it is sensible to opt-in and get ready for MTD for VAT now.
I’m An Accountant, Does My Accounting Software Comply to Making Tax Digital?
Currently the submission of VAT returns is completed through HMRC’s online service. This facility will become unusable once Making Tax Digital is implemented and companies will be expected to use a MTD-compatible software.
Alternatively, you can hire an accountant or advisor to help with filing your returns using suitable Making Tax Digital software.
When Do I Have To Change To Digital Tax?
Making Tax Digital is rolling out officially during the first quarter of 2019. This means that all businesses which end their financial year in April need to begin the 2018/19 period equipped with an MTD-compliant software. As a priority businesses should arrange their MTD budget in advance, so they are not caught out last minute.
What are the Benefits of Making Tax Digital?
Businesses are renowned for resisting change, and many will be apprehensive about the MTD shift, but you shouldn’t be! There are many good reasons to embrace the new strategy.
The purpose of introducing MTD is to eliminate Tax and VAT inaccuracies and generate extra revenue for businesses. Whilst the initial cost of the switchover is higher for low earning SMEs, the scheme is highly efficient which will be beneficial to your business in the long term.
The only cost will be the investment in either a software or an accountant. MTD-compliant softwares have excellent tools to help you access HMRC digitally, allowing you to produce invoices, quotes, record receipts, calculate and pay bills, and prepare your payroll quickly. Saving you time and money!
What Can I Do To Prepare for MTD?
As the deadline approaches, your business should invest in an MTD-compliant software. You can arrange for this to be installed based on when you begin your financial year. You should take time to understand the software and all of its functionality, see how it will fit your business needs. Then, set a budget to prepare for the new initiative, including all the possible costs you may incur regarding MTD, such as resources and staff training.
Are There Penalties in the Case of Non-Compliance?
Businesses who do not comply with Making Tax Digital risk facing huge penalties. All businesses will need to apply changes to ensure they meet the requirements of the new system. So, as the time approaches for your business to make the transition, start thinking about the benefits of utilising the new technology offerings and investing in the services of tax specialists to help you comply with the guidelines.