Since Making Tax Digital (MTD) was announced back in the 2015 budget by George Osborne, we have endeavoured to keep you up-to-date with the details of the roll-out as they have been announced by HMRC. We make no apologies for yet another correspondence regarding this initiative which is the biggest shake-up in taxation legislation for over two decades and urge you to read on, especially if your businesses’ turnover exceeds the VAT registration threshold.
By now you should be aware that the compulsory digital tax system will be mandatory from 1 April 2019 for all VAT registered businesses with taxable turnover over the VAT threshold, currently, £85,000. HMRC’s online VAT filing service accounts for 90% of all VAT return submissions currently made but, from 1 April 2019, this service will be removed and VAT registered businesses will be compelled to either use an adviser who can file submissions on their behalf using HMRC approved software, or to use an ‘API-enabled’ bookkeeping solution that will allow them to perform such submissions themselves. Simply put, when MTD states that VAT return data must be kept and filed digitally, it means the software used must be capable of providing information to HMRC digitally.
HMRC has always implied that spreadsheets would not be part of the vision for a wholly digital system. However, on July 13th, after significant pressure from various directions including the accountancy profession, HMRC released its final addendum which states that spreadsheets can continue to be used, providing they are used alongside bridging software that can submit information digitally to HMRC.
This may help the migration process for some businesses, particularly the more complex ones. However the vision for an entirely digital process is still there and a move to a fully functional cloud accounting system is inevitable. We would still recommend doing this sooner rather than later and taking the bridging software route as a last resort. Bridging software is very much a “sticking plaster” solution and will inevitably be fraught with risks of errors when submitting to HMRC. At Greaves West & Ayre we have been actively promoting the use of cloud-based accounting software for many years as we believe that there are many benefits to our clients as well as ourselves, aside from compliance. These include multi user access, being able to access a clear overview of your financial situation in real time from virtually anywhere and mitigating the cost of expensive software updates.
So ultimately MTD is a great opportunity for firms to make a step-by-step move to digital. If the transition is handled correctly this should mean increased efficiencies. Greaves West & Ayre have already held a series of seminars on MTD in November at various locations convenient to our clients based in Northumberland, East Lothian and the Scottish Borders. During these events we introduced some of the leading software providers and gave advice on how to make the move from manual accounting records. For further information and dates, please keep an eye on the events page of our website or email firstname.lastname@example.org