The final phase of Making Tax Digital (MTD) for VAT is just a few short months away.
From 1 April 2022, even the smallest VAT registered business will need to comply with the digital recording and reporting of VAT in line with their VAT periods – including those below the £85,000 VAT threshold who are, presently, voluntarily registered.
Millions of UK VAT registered businesses above the VAT threshold of £85,000 have already been complying with MTD since it was introduced a number of years ago and, in doing so, they have invested time and money to bring systems and processes up to date, in line with the regime’s requirements.
Now, many more small businesses are likely to fall within scope of the initiative, which will require them to use the latest MTD-compliant cloud accounting software. It’s worth bearing in mind that this encompasses the use of spreadsheets and compliant bridging software, together.
Given the scale of the change, businesses that will be affected should be open to acknowledging this early on and to taking some action to ready themselves.
We’re not expecting you completely overhaul your processes overnight, but to take advantage of the opportunity to proactively work towards compliance with the rules, and so a business that runs more efficiently.
This might involve you doing one or all of the following:
- Researching or seeking advice on the most appropriate HMRC-compliant software to implement within their business;
- Investing in additional training, to ensure staff can easily abide by new processes and get the best results; or,
- Having a discussion with your accountant about how you’ll be impacted, how you can embrace the changes that the initiative will bring and, beyond that, benefit from them.
MTD-compliant software
In order to meet HM Revenue & Customs’ (HMRC) MTD requirements, you must use software that can:
- Keep and preserve records in a digital form
- Create a VAT or tax return from the digital records held in functional compatible software, and provide HMRC with this information digitally
- Provide HMRC with VAT and tax data voluntarily
- Receive information from HMRC, via the API platform, that the business has complied.
Many of the existing cloud accounting platforms on the market have been created or adjusted to ensure that they meet the requirements of MTD for VAT.
Not only that, but they offer many other advantages to businesses, regardless of size, industry or time in existence, often helping business owners to save time and money while providing critical real-time insights into a business’s financial health.
If you’re not ready to delve into cloud accounting just yet, as aforementioned spread sheets are still accepted as a digital record, though they don’t necessarily carry the same benefits or insights that cloud accounting packages will.
Our team of chartered accountants and business advisers can help you find online cloud accounting software that is suited to you and your business’s needs, thanks to our experience supporting hundreds of organisations with this transition.
Failure to comply
Given the magnitude of the ‘transformation’ required, particularly where a business is still heavily reliant on manual record keeping, there are concerns that some businesses may not be ready in time.
In contrast to the initial launch of MTD, there will not be a soft-landing period for this latest stage and businesses can expect to be fined, or even investigated, by HMRC for non-compliance.
It is, therefore, essential that you seek advice if you are not yet compliant, and you deem that you will need support to get to where you need to be.
How can George Hay help?
Even though migrating to the latest cloud accounting technology might be outside of your comfort zone, the same cannot be said for us. Our aim is to make your journey to meeting your digital tax obligations, stress-free and worthwhile beyond compliance.
Given the impending implementation of the new rules and the consequences associated with not meeting them by April 2022, we are ready and able to support businesses, like yours, as they prepare for Making Tax Digital.
To discuss your concerns about the MTD initiative, or your plans to comply with the requirements, contact us today.
