Making Tax Digital (MTD) comes into effect on 1 April which is just a few days’ away. If you are still not sure what MTD is and whether this applies to your business, it is where VAT registered businesses with an annual turnover of £85,000 or more need to file their VAT return online via cloud accounting software e.g. QuickBooks, Xero etc.
MPs were warned last month that MTD will seriously effect small businesses with Martin McTague, policy and advocacy chairman at the Federation of Small Businesses, informing the Treasury committee: “HMRC has underestimated the reaction they are going to get. We are literally weeks away so we are very, very close to a very serious problem for a lot of companies.”
HMRC have reported that only 70,000 businesses have signed up for MTD (as of 1 week to go) out of the estimated 1.2m that need to do so, despite research at the end of last year indicating that 83% of businesses knew about MTD and had begun preparing for it! At present they have stated that about 3,000 are signing up each day to register and they have written to every business about the need to sign up.
HMRC have said that 1 April is not a “cliff edge” as businesses only need to sign up when they need to file their VAT. Therefore, the first businesses that will need to file via MTD are those that have a quarter end of 30th June, due in August. Though you may have until August it is best to start the process now and not leave too late.
For those that have software at present they need to ensure that it is MTD compatible and need to sign up for the new service and authorise their software for MTD. For those that do not use software or not represented by an accountant will need to choose a software to use and authorise the new software for the online service. There are over 220 software products available for businesses to choose offering different levels of functionality at various price points, including some that are free.
During a business’ first year of mandation, HMRC have said that they will be more lenient in issuing filing or record keeping penalties if the business is doing their best to comply. However, penalties will still apply where there is deliberate non-compliance in order to safeguard VAT revenue.
There is caution with this in that HMRC will still apply penalties for late payment so ensure that your VAT bill is paid on time.
If you need further information about MTD or bookkeeping software, then please get in touch on 0113 2864486.
Source: Accountancy Daily & The Times
Photo: Photo by Helloquence on Unsplash
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