4 October 2018
Making Tax Digital (MTD) is HMRC’s plan to digitalise the UK tax system making it more effective, efficient and easier for taxpayers.
Currently 99% of businesses submit a VAT return; 87% of whom login to and submit via the HMRC portal. This means that at present only 12% of businesses are submitting through an MTD approved software supplier.
From 1 April 2019 this portal will be closed down, and VAT returns will need to be submitted directly from software providers.
In the pilot for MTD, HMRC are working with software suppliers who have tested their products in HMRC’s test environment. As it stands there are only about 40 suppliers on this list, so the big question is, do you know if the software that your business is using is approved?
If not, you could have major issues in six months’ time when you can no longer submit your VAT return.
Many of the larger accounting software providers have not yet been approved by HMRC. One solution is bridging software- This is software that can pull the data from your existing software into a format acceptable to HMRC and the return is then sent from bridging software rather than your accounting system.
Bridging software is especially useful if you have more complicated returns that include partial exemption or group VAT returns for example where currently you may use excel to make the calculations. Excel alone is not a viable option from 1 April 2019.
Furthermore, if you are currently using desktop software, such as Sage50, you may be required to pay a fee to upgrade to a compatible platform. However, the cost of doing so can be more expensive than simply switching to cloud based accounting software such as QuickBooks or Xero, which in many instances is a better accounting package.
Cloud accounting will streamline your processes, saving you valuable time and enabling ongoing business growth. We are able to help our clients every step of the way to ensure the path to Making Tax Digital (MTD) runs as smoothly as possible.
With only six months to go until MTD comes into play it’s alarming how many businesses are not actually ready, and as the saying goes, if you fail to prepare, you prepare to fail. Failure to comply will result in penalties.