MAKING TAX DIGITAL… What’s it all about?
You may have heard about HMRC’s initiative “Making Tax Digital” and it may appear on your “to do” list as something that you really need to get your head around. We have compiled a list of FAQ’s based on our own client queries to help you out.
What is Making Tax Digital?
Making tax digital (MTD) is a government initiative to digitise the way that we give them information about our businesses and puts an end to the old types of return. In reality, it means a more streamlined way of how we give them information, how much we give them and how frequently they receive it.
Does it apply to my business?
At the moment, MTD only applies to businesses who must complete VAT returns, therefore those whose sales exceed the current VAT threshold of £85,000. If you are registered voluntarily, it is optional and if you are exempt from VAT, it doesn’t apply.
HMRC do have plans to include corporation tax and income tax however, but no firm dates just yet.
When does it start?
The first compulsory VAT period starts on or after 1 April 2019. Given that its best to keep all records for the same financial year in the same way, if your financial year ends in March, then start on 1 April 2019. If your financial year ends in June however, then you should ideally start on 1 July 2018. It’s worth thinking about and planning ahead. If you’re not sure, get in touch and we’ll happily advise you for free.
Which software should I use?
HMRC have a list of compatible software. At the time of writing, Harlands tried, tested and approved software such as Xero, Quickbooks, Free Agent and Sage were included.
I’ve been using excel to record my business finances. Does this count as electronic?
Not directly. Software is being developed to convert from excel to an HMRC friendly format, but given that excel is prone to error as well as being timely to input, now is a good time to embrace the advances in technology for all the reasons listed below.
It just sounds like more red tape to me. Are there any real benefits?
We are huge advocates of using software. Automated features, such as bank feeds and receipt catching apps can save time significantly, resulting in less administration, potentially lower accountancy fees, better reporting and simply more free time! But most importantly, the software typically has dashboards that tell you how your business is doing enabling you to plan ahead, be in control and have peace of mind.
I need to know more. Where can I go for help?
HMRC and some software providers have free webinars to guide and assist, but if you feel that you need to talk it through with a real person and ask questions that directly relate to you, then our specially trained team can give you a free consultation. Give us a call on 01726 74573 or email firstname.lastname@example.org