MTD goes live in less than 6 months, but research shows that 40% of small businesses that will be affected by MTD, are not yet aware of it, and have certainly not begun to prepare for its impact.
So are you affected and what do you need to do?
HMRC are about to launch their publicity campaign to increase awareness, but here are some frequently asked questions from small businesses:
Does MTD apply to me?
If you run a VAT-registered business (limited company OR sole trader) with a taxable turnover above the VAT registration threshold (currently £85,000) then YES it applies to you from April 19.
I have registered for VAT voluntarily, so I am VAT registered – but my turnover is less than £85K. Does MTD apply?
No it will not apply from April 19. MTD is planned for all businesses over time, but you not caught in this first batch of people!
What does MTD mean anyway?
MTD means that you will have to keep digital VAT records and send VAT returns using “MTD-compatible” software from April 19. The deadlines or frequency of returns are not changing, it is just how the information gets to HMRC.
If you are already using commercial accounting software, it is likely that the provider is working hard to make it MTD compatible, and you should be OK, though you will need to upgrade to the latest version that is compliant.
HMRC have provided a list of suppliers it is working with to provide MTD compliant software so you can check:
I keep my accounts on a spreadsheet – is that still OK?
Technically yes, but I would be thinking about switching to a digital package!
If you use a spreadsheet, then that spreadsheet must be able to submit the required data to HMRC digitally and to do this you will need to add “bridging software”. This is a piece of software that will extract the data from your spreadsheet and send it to HMRC in the correct format.
What you will no longer be able to do is physically retype in figures from one piece of software to another.
We have no examples yet of what this “bridging software” might look like – all we do know, is HMRC aren’t providing a free version for you to use!
My accountant does my VAT return from the info I send them so won’t they just deal with it?
The portal that accountants use to submit vat returns will be closing, as this requires someone to type the information into it – and this will no longer be allowed. Nor can your accountant take your spreadsheets, correct a few errors, and then retype the information into a vat return and submit it, as the information flow has not been digital. HMRC have said that “cutting and pasting” information will be acceptable for the first year only, to give people time to update systems.
So what do I need to do if I am affected?
You need to look at how you keep your accounts, and if you have not yet moved onto a digital package, now really is the time to do it! The start of your new financial year is the perfect time, so if that falls between now (or even a couple of months ago) and 31 March, then I would switch your accounts over now, so you are up and running smoothly when the changes come in.
Digital accounting packages are not expensive – prices can be as low as £9 per month, with add ons that allow you to submit receipts electronically. Switching to digital will save your business time, and give you more accurate data about your business in real time, so be brave – bite the bullet and go digital!!
HMRC are still wanting to bring in MTD for everyone, so although the timetable has been pushed back to at least 2020, even if you don’t have to make the switch before April 2019, it is worth assessing how you keep your accounts and if it could be more efficient!
For more information please contact Rosie Forsyth at Wilkins Co.