At present, businesses in the United Kingdom with a turnover of £85,000 should be aware of a new tax system coming. It’s been in the works for some time, but the April 2019 starting point for Making Tax Digital (MTD) is nearly here. MTD has caused much consternation among those who do much of their books in the old-school manner.
However, given most sole traders and the like are not likely to be either VAT registered or earning the business threshold mentioned, this might not be a huge issue for them. For any business currently operating above the threshold, though, it’s important that you work to deal with compliance as soon as possible. How, then, can you do this?
Stop relying on paper
The first big change that you need to make is how you store all of your records. In the past, using simple paper storage was enough for all of your books and accountancy needs. Paper receipts, paper notes etc. would all be suffice for a book audit. That is no longer the case for businesses which will fall under the MTD VAT regime.
If you would like to make sure you are ready for this new system, then we recommend that you start keeping both paper and digital records. Yes, it will require some time spent on a daily or weekly basis to update your books, but matching your digital record with your paper records is going to become an important part of better, smarter governance.
If you are serious about making your business more productive, then, you should immediately look to make this change. For any business that is under the MTD for VAT platform as of April 2019, this is a very important change to make.
Start using HMRC approved software
Another big change is that many of the leading accountancy software packages will not be migrating to MTD for VAT purposes. This means that HMRC would no longer accept audited accounts put through this kind of software: instead, it will have to pass the HMRC API platform.
Otherwise, you will have to find a new accountancy software. However, if that is the case, it is not the end of the world. Many companies are going to have to make the change, and with many MTD for VAT compliant software available, sourcing a replacement should not be a huge issue.
Is VAT changing?
No, VAT is not changing. To be compliant with MTD for VAT, you will not have to do much work to help re-learn VAT best practice. The underlying rules of VAT will not be changing, nor will the information needed to be given to HMRC. VAT returns will be the same nine box solutions as they were previously, though you could submit more information if you so choose.
Also, filing dates and deadlines for payment for VAT will not change. While how you handle your books will change drastically, changes to VAT itself are minimal. Therefore, you can put all of your effort into compliance.