Prepare to go digital! – Choose MTD compliant software
By now you should be aware that Making Tax Digital (MTD) is arriving in April 2019. This is a HMRC initiative designed to implement a fully digital tax system which will be effective, efficient and easier for UK taxpayers.
This change will affect VAT-registered sole traders, partnerships, limited companies, limited liability partnerships, charities, public sector bodies and large corporates with taxable turnover exceeding the £85,000 VAT threshold. These businesses will be required to file VAT returns through a MTD compliant digital platform and not via the current HMRC portal.
If you haven’t yet considered the benefits of moving your accounts and bookkeeping to an online system, there are only a few months to get ready and ensure compliance with these new regulations. This article seeks to clarify the facts to help you identify how your business will be affected by MTD and plan your next steps in selecting compliant software.
Making tax digital latest news
HMRC are working with over 150 software suppliers who will be delivering MTD solutions ready for April 2019 and have published a list of those providers who have tested their software in the HMRC pilot.
Many businesses already use some form of software to maintain their VAT records in which case you will need to consult the list below, or your supplier direct, in order to understand whether they will be MTD compliant in time for April 2019.
Some older software won’t be compliant with MTD requirements.
This list of providers is being continually updated and can be found here: https://www.gov.uk/government/publications/software-suppliers-supporting-making-tax-digital-for-vat/software-suppliers-supporting-making-tax-digital-for-vat
Will there be any free MTD software?
We understand from HMRC that they will NOT be supplying free software for MTD.
Sage and MTD
If you use Sage you will not automatically be MTD compliant just by being on the newest version. In order to be compliant on Sage you must be on the subscription model (Sage50c).
If you are not on this model then you will be able to bolt on the MTD module for an additional cost.
What if I am on an old version of Sage?
You will have a couple of options:
- If you want to continue using Sage desktop then you will need to upgrade to the latest version of Sage and either:
a. Go onto the subscription model whereby the MTD module is included;
b. or pay the annual cost on top of the annual Sage fee you already pay
Point to note: If you are on a very old version of Sage this additional annual cost may be equivalent to re purchasing the product.
2. Is Sage still the right product for you? This could be an opportunity to evaluate your needs against the other cloud products out there that will be MTD compliant such as Xero, Quickbooks Online and Exact.
Wider benefits of going digital
Accounting systems are increasingly becoming a source of competitive advantage. With advances in connected software and machine learning there is huge potential for automating transactions providing real time information. You can become smarter in where you spend your time.
MTD could be a great opportunity to put a system in place that can streamline your current processes and provide more insight into business performance from meaningful intelligence on how your customers pay you, through to scenario forecasting your cashflow.
Although accounting software is a means to become MTD compliant the benefits go much further – it is a tool not to be ignored or underestimated.
MTD and directors
HMRC will be bringing in a requirement for directors to submit their personal tax returns quarterly.
MTD for other taxes is likely to start from 2020 so there is some time to prepare but watch this space – this may change depending on how well the first phase for VAT is implemented!
How we can help you comply with MTD
The Kreston Reeves Online accounting and digital business solutions teams are on hand to give businesses bespoke advice on suitable software packages that will meet your needs and enable you to comply fully with MTD.
We have put together a flow chart to help you in identifying how your business will be affected and your next steps, please access this in the ‘Downloadable documents’ section below.
For more information about the topic explored in this article, contact us here.
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