MTD [Part 2] Making MTD simple
Are you a business that needs to be MTD ready? Ask us.
If you are VAT registered, operating above the £85,000 threshold, you will no longer be able to submit your VAT return manually to HMRC from 1stApril this year.
If you are approaching the VAT threshold, it is well worth knowing what to expect so it’s worth your while being informed.
There are a small percentage of exempt businesses and these have been notified by HMRC by now.
35,000 business have a deferred date of October 2019, but again you will have been notified if you are one of these (these are trusts, local authorities, public corporations, not-for-profit, VAT groups and a few other categories).
If you believe you should be exempt or deferred, contact HMRC now.
Would you like a MTD review? Book in to see us.
The first thing to do is to get together all the information you have on your current systems and procedures. How do you currently organise your accounts internally? What software products do you use? Then talk to us and organise an MTD review.
We can work with you to make sure you have what you need for a smooth transition.
Work out which business systems or processes you need to implement. Talk to us.
‘Keeping the books’ in paper form is no longer acceptable to HMRC. You will need to make sure your accounts are maintained in a suitable electronic software system. Even spreadsheets are no longer adequate although there is a temporary fix available to tide you over if you do use them (see ‘Compatible software’).
You’ll need to consider how you raise invoices, record receipts and which of your VAT accounting functions exist outside of your current accounting software.
If you raise invoices manually, you’ll have to transfer these to your MTD software. You can continue to raise them manually and transfer the information but it will be more efficient to change how you do things eventually.
Make sure you have compatible software. Ask us – or your software supplier.
You need to file a VAT return digitally but you’ll also have to store some of your VAT information digitally. If you currently use different software for these functions, they must be digitally linked.
If you are running online accounting systems, check with your supplier for feature updates that will create a solution to MTD.
Consider the age of your software – do you need to upgrade it?
Every different accounting package has its own solutions for MTD so it’s important to talk to your supplier about how it connects to HMRC. We work primarily with Xero and Free Agent but have good knowledge of many other systems too.
Using cloud-based software is the first step to being MTD ready. If you don’t already do this, you probably use desktop software – from a physical package that you’ve bought in a box that sits on your bookshelf. Now is probably the time to move away from this way of working. Cloud-based software means you always use the most up to date version and you subscribe annually or monthly instead of ‘owning’ it. You access the software via a computer, tablet or mobile. This is quite different to what you’re used to but the benefits of subscribing and always having up-to-date software far outweigh the benefits of owning something that is, at best, out of date and at worst, obsolete.
If you are still using spreadsheets to record your VAT data, you can use HMRC bridging software to port the information to them. Long-term, bridging software isn’t a solution as it doesn’t fulfil HMRC’s digital record keeping requirements. However, to keep you compliant and avoid penalties, you can use it as an interim measure.
Know when you need to file your first return and how this will work
Your first MTD-ready VAT submission is the date you usually work to.
Most importantly, you must prepare now so you are ready to submit your return in time.
Give yourself as much time as possible and be prepared for a little congestion on your software supplier’s helpline as so many UK businesses are all doing this at the same time, give or take a few thousand. Equally, give us as much notice as you can if you need help, it’s a busy time for accountants too!
If you’re ready now, you can start using the system in its pilot form, before the 1stApril compulsory switchover date.
As with all of your financial matters – if you need help, just ask.