Do you know whether your business will be affected by the new Making Tax Digital rules coming in this April? Find out everything you need to know in our handy guide to the new government plans.
An ambitious plan for Making Tax Digital
Making Tax Digital is the government’s plan to bring businesses and HMRC into the 21st Century, by going digital with their business records and taxes.
Most VAT registered businesses with a taxable turnover above £85,000 must start to keep digital VAT records from April 2019, and also use software compatible with Making Tax Digital to submit their VAT Returns to HMRC.
The key aim is efficiency benefits for business by doing things online rather than using mountains of paper, managing tax more easily and allowing business owners to focus on what they do best.
But this being new tax law, the rollout is not optional, and business owners need to be fully across the Making Tax Digital rules to make sure they comply with the government timeline.
The Making Tax Digital timeline
More than one million businesses in the UK will be affected by Making Tax Digital. The majority of those will have to change the way they keep their VAT records, and how they submit their VAT returns.
The exception is a small amount of VAT-registered businesses that HMRC recognise as having more complex requirements – such as trusts, not for profit organisations not set up as a company, and some public sector organisations.
If this applies to your business, HMRC will already have engaged with you and allowed you to defer joining until further down the timeline.
August 2016-January 2017: HMRC published Making Tax Digital consultations
November 2017: the Finance (No.2) Act 2017 passed, with legislation for Making Tax Digital relating to VAT and Income Tax
July 2018: HMRC published a VAT Notice explaining the rules for Making Tax Digital
October 2018: HMRC opened a Making Tax Digital VAT pilot to half a million businesses
February 2019: HMRC finished writing to every business required to join the scheme this year
April 2019: Making Tax Digital becomes mandated for all customers (except those that have been deferred)
October 2019: Making Tax Digital is also mandated for customers previously deferred
What you need to do for Making Tax Digital
As a business owner, your first reaction to the Making Tax Digital plans may have been to discuss your VAT obligations with your accountants.
At Oscar Fairchild, for example, our VAT Return service is specifically designed to give your business the help it needs to stay HMRC compliant. And our expert AAT qualified bookkeepers and ACCA accountants are already helping businesses across London, Essex and Hertfordshire get ready for the new Making Tax Digital regime.
Kim Redwood-Lee advises business owners: “If you are affected by the Making Tax Digital rules you need to act now to meet the April deadline. You need to be selecting the software you are going to use and preparing to keep all your records digitally.”
In order to keep VAT records digitally and be ready to send VAT returns to HMRC you need to choose which Making Tax Digital-compatible software your business is going to use.
The software could be a cloud-based app that you can access from your smartphone and tablet as well as office-based computers. And there is a full list on the government website. But your accountant can advise you on the right package to use if you’re not sure.
Costs vary, but most software packages range between £10 and £30 a month. A small price to pay that could be offset by time saved on admin, and rectifying errors in paper records and on spreadsheets.
Using spreadsheets has not been banned by the government – but you will need to know how to transfer the records into compatible software to send it to HMRC. And from March 2020, only digitally integrated spreadsheets will be permitted.
Day-to-day changes for Making Tax Digital
If you have followed the details supplied to you by HMRC correctly, you have hopefully already signed up your business for Making Tax Digital online. If not, you need to do that quickly, or get the accountants acting as your agent to do it on your behalf soon.
Whatever you do, do not delegate this task to unqualified staff. It’s always a risk to leave your financial management with unskilled members of your in-house team, when you could be getting help from financial experts, like Oscar Fairchild. You can read more about the dangers of letting unqualified staff look after your finances in our recent blog.
Once you have selected your Making Tax Digital software, you need to start inputting all your usual VAT records into its app. Our recent Oscar Fairchild blog helped business owners decide which Cloud-based app is right for them, from the likes of Xero, Free Agent, KashFlow and QuickBooks. As well as providing detailed advice on how to make a smooth transition to cloud-based accounting.
If you’re still not sure about the digital records your business needs to keep, full details are available in HMRC’s VAT Notice 700/22. Or if that’s too daunting for you to understand, it isn’t for accountants like Oscar Fairchild, used to completing and submitting businesses’ VAT returns to HMRC each quarter.
Get expert advice to help you get making tax digital right
Whatever questions you have when thinking about making tax digital for your business, working with Oscar Fairchild’s specialist bookkeeping and accountancy services for business owners makes perfect sense.
About Oscar Fairchild:
Oscar Fairchild (incorporating Redwood Clarke since 01.09.18) is an Association of Accounting Technicians (AAT) qualified accountancy & bookkeeping practice with offices in The City of London and Billericay, Essex. Offering a wide range of services including Self-Assessment Services, Annual Returns, VAT Returns, Credit Control, Payroll, Auto Enrolment Pension and Management Account services to high growth businesses across London, Essex and Hertfordshire.