HMRC are focused on an ambition to ‘become one of the most digitally advanced tax administrations in the world’ and with a statement like that, additional compliance and headaches are likely to follow, whatever the size and sector your business operates in.
With the first phase of what HMRC are calling Making Tax Digital (MTD) due to affect every business, company, partnership or sole trader as early as April 2019, there are only a few months to get ready and ensure compliance with these new regulations. This limited timescale will be even more keenly felt by those in rural business experiencing a sometimes limited digital infrastructure.
As harvesting has finished for many of you and as autumn approaches, now is a good time to get on top of MTD and what it means for your business as it is going to take time to prepare.
If you haven’t yet considered the benefits of moving your accounts and book keeping to an online system, we would be happy to provide further information to you. Having real time data available on your smart phone is helping many rural businesses to manage debtors, make purchasing decisions with real time information and to run their business in a smarter and more organised way.
MTD is a key step towards HMRC’s proposed plans to introduce quarterly reporting of financial information, which they are currently planning to roll out after 2020.
In order to clarify the facts and to ensure you are prepared, here are answers to some of the most common questions we are being asked by clients about MTD:
What are the criteria?
The first phase of MTD includes VAT registered entities with a taxable turnover above the VAT threshold of £85,000. If you fall within this criterion, you will need to keep VAT records digitally and file your VAT returns using MTD compliant software.
If your taxable turnover is close to the VAT registration threshold and you exceed this at any point, compliance with MTD will become mandatory, even if your turnover subsequently drops below the threshold.
How long do I have?
MTD will begin with the first VAT period starting on or after the 1 April 2019.
Is my current software compliant?
With our agricultural clients using a variety of accounting packages to maintain their records, we have checked with the leading suppliers and been assured they are working on solutions. Whether there will be additional costs for the updated software is not yet clear, but it is likely clients will need to be on the latest software versions to meet the new filing requirements.
The transition from manual records is likely to be a significant issue, although the required changes can give rise to the opportunity for business management improvements.
HMRC have produced a list of suppliers who are working with them towards compliance and this can be found at:
The current list may not be complete and we would recommend that you contact your current software supplier to confirm whether they will have a compliant product and what the likely costs will be. Alternatively speak to us and we will be able to look into this for you.
My software supplier has confirmed they are not working on a solution, what next?
Although not ideal, this situation isn’t the end of the world. HMRC have discussed instances where ‘bridging software’ can be used. Bridging software will take your information and report the accounting information to HMRC in the prescribed format. This does require the information to be kept electronically in the first instance as the transfer of data to this product must be digital.
Want to know more?
We advise our clients to evaluate their software and ask whether they believe they are getting the optimal functionality that they deserve. We have helped clients transition to software that saves time, has more accessibility and gives them a clearer understanding of their financial position.
With MTD on the horizon, this is a great opportunity for you to look at your accounting function and evaluate your current processes.
Our experts can help you decide on the online accounting solution that is the best fit for you, and your agricultural business needs. We are dedicated to providing user-friendly, time-efficient products to our clients and if you have any doubts on your current solutions, regarding cost or usability, we will be able to help find the best option.
For further information please contact Steven Morley, online accounting and digital business solutions at email@example.com or on +44 (0)330 124 1399.