Making Tax Digital or MTD – have you heard of it? Everybody seems to be talking about it from the Financial Times to the Daily Mail, so the chances are you have. But have you done anything about it or are you just hoping it will go away? It won’t, so here’s our quick guide to getting MTD compliant.
You’re running a business and it’s not like you to put off making decisions or shy away from doing what needs to be done, so why would you overlook this?
Part of the reason may be the widespread confusion caused by various changes as to who will be affected first, delays in start dates and sometimes over-technical guidance.
On top of this, there has been speculation that the current start date of the 1 April 2019 (two months to go!) will again be pushed back. Be aware that there has been no announcement from HMRC that the start date will be delayed. So, now that your personal tax returns are filed this is the next big issue most businesses will need to deal with.
Do not PANIC if you are feeling a little behind on this. Thankfully, there is still time to make sure you are compliant before the 1 April 2019, but you will need to ACT NOW.
What do you need to do?
The main requirement is to make sure you are recording your business’s transactions in a digital format. If you are a fan of the big red ledger books, then I am afraid it’s time to say goodbye and use them for leisure and hobby purposes only. Any accounting or bookkeeping software and even Excel is digital, but you must be aware of the second requirement.
The second requirement is that your chosen digital format MUST be able to electronically communicate with HMRC. You will hear a lot of talk about software compatibility and APIs (application programming interfaces, for those of you interested) but at this stage your software just needs to be able to talk to HMRC’s software about your business’s VAT returns. What a chat that will be.
If you are currently logging in to the HMRC portal and entering the numbers into the online boxes, then this will NO LONGER be enough. Instead, the digital solution you choose must do all the hard work.
Since its announcement, we (by that I mean me, other accountants, tax advisors, a few interested bystanders) have been eagerly (yes, eagerly) awaiting news of which software providers have made the cut and will be able to offer a solution to this problem.
HMRC has now published a list of the fully compliant software providers and you can find this here.
There are one or two surprising omissions. For those of you that use Sage Line 50 (isn’t that most SME’s?!) you will find that it is not on the approved list and if you check the Sage website nor is it going to be. Do not fear, Sage is offering an alternative and its online offering will be compatible. If they haven’t contacted you yet to let you know of this package or you’ve missed the flyer, you might be unaware of this important issue and the steps you need to take.
Most cloud-based software is compatible and other providers of various sizes have taken the relevant steps to ensure compliance. Do just check that the version you are using is compatible though as you may need to call your software provider and upgrade.
Remember, not everybody will be affected from 1 April and some will already be compliant. It is certainly worth biting the bullet and taking 10 minutes out of your morning to call your software provider or your accountants and just double check.
Update: At the time of writing this blog, there was much discussion that the Making Tax Digital VAT start date would be pushed back beyond 1 April 2019. Whilst still possible, it’s unlikely that this will happen and we continue to advise our clients to be prepared and ready for 1 April.
If you have any queries regarding Making Tax Digital, please contact Steve Ive at email@example.com.