How to Switch to Making Tax Digital In your Business
18 February, 2019
We have spoken about Making Tax Digital on a few occasions now, and without wanting to prattle on, the M2M team hope that by revisiting the subject, we are, if nothing else, demonstrating the importance of the topic, particularly with implementation soon to take place.
In April this year, businesses will start to be required to keep their records digitally and send their 9 box VAT return data to HMRC. Sounds straightforward right? But there’s a few things you’ll want to consider first…
To help simplify your considerations, Sage has put together a Business checklist – a 4 step process – which is as follows:
Determine whether you’re impacted by the change
Review your plan
Start reviewing your VAT process
Let’s explain this in more detail…
Step 1: Determine whether you’re impacted by the change
Any business that is above the VAT threshold (of 85k+) is most likely already utilising some form of software or spreadsheet.
By understanding how much of what you are doing already is MTD compliant, you’re halfway there, as this will help to indicate if there is anything extra you need to do.
For people using software for VAT, a lot of the software is enabled already to translate into the 9 boxes of VAT return data, so for businesses that are using their package in that way, they will no-tice very little change or impact.
For those who’ve got a mixed approach or manual approach to record keeping however, they will be more affected by the change, as they will require a digital system to replace the manual one.
Step 2: Review your plan
If you’ve got an accountant, now is the time to talk to them. And if you’re using software, and you’ve got a supportive software package, now is a good time to talk to your software provider – doing so will help to bring you clarity. You’ll want to know when their software will be enabled for MTD, and when to join the pilot. With only a few months to wait until MTD implementation, the answer will likely be now.
For businesses that are using spreadsheets, and manually completing their VAT, there are provid-ers that are offering bridging software, bridging the gap between manual and digital, so this is po-tentially an option to help assist in your transition to MTD.
If you’re a new business or an accountant who’s got new clients joining, it’s advised that you whol-ly undertake a digital approach, rather than opting for a manual one. This is because, digital will soon be obligatory so you’re effectively complying from the get-go, but also because, by taking on software that recognises MTD, you’ll benefit from a much fuller service. For example, Sage soft-ware helps to eradicate common errors made when using a manual approach, it also offers advise such as managing credits and debtors, creating invoices etc.
Step 3: Start reviewing your VAT process
Work with your partners or accountants – and don’t hesitate to get support from your software provider if you will be downloading accountancy software for the first time.
Outline the processes you may need to change:
• Are you submitting through HMRC’s online gateway? Are you using Excel or paper?
• Will your current methods/software allow you to submit through the gateway once MTD comes into effect?
• Do you have any adjustments to make before April?
Step 4: Adopt early
The faster you get started, the more likely you are to fulfil your new MTD obligations seamlessly come April 2019. Give yourself the time to adapt and get the support you need to make the impact as minimal to your business as possible.
The VAT Mandated Service WILL Have A Soft Landing
Just remember, HMRC won’t penalise people for getting things wrong for the first year, that gives you a year to get used to the new digital VAT service. And for those joining the pilot service, this provides you with additional time to get used to it. This means, HMRC won’t penalise people for not keeping their records digitally, and not sending their data in the agreed API format.
Don’t Spend Another Year Getting Ready…
As step 4 suggests, the key is to adopt MTD early. Despite HMRC not penalising businesses who haven’t adopted the digital approach within the first year, this shouldn’t mean that businesses spend another year getting ready.
So, what happens next? If you are a current Sage customer and would like to be a part of the pilot, find out more here.
Or for more information on MTD, why not watch the video we’ve featured below, which explains the rules for Making Tax Digital for VAT in more detail…