One of the most talked about topics in the tax industry right now, Making Tax Digital, will begin in April 2019.
Of course, the fundamental switchover will already be familiar to many VAT-registered business owners. The type of things to expect, however, may not be as familiar. Some businesses will panic as the go-live date approaches and there may be challenges that you haven’t anticipated. Here are some of the things you should consider to help prepare for a smooth transition:
- Which Businesses Require Making Tax Digital?
Every VAT-registered business within the UK that has a taxable income above the VAT threshold of £85,000 will need to transition to the MTD initiative. Smaller firms with turnovers below this limit can either opt into the system voluntarily or continue with their manual record keeping. If your company is presently below the threshold but you think your earnings will rise in the coming financial year, it is sensible to opt-in and be prepared for MTD for VAT now.
- Does Your Existing Accounting Software Comply with Making Tax Digital?
Currently, the submission of VAT returns is completed through HMRC’s online service. This facility will become redundant once Making Tax Digital is implemented and companies will be expected to use MTD-compliant software. Alternatively, you can hire an advisor to help with filing your returns using suitable Making Tax Digital software.
- When is the Deadline for Making Tax Digital?
Making Tax Digital is rolling out officially during the first quota of 2019. This means that all businesses which end their financial year in April need to begin the 2018/19 period equipped with an MTD-compliant software. As a priority businesses should arrange their MTD budget in advance.
- What are the Benefits of Making Tax Digital?
Although many businesses may be apprehensive about the arrival of MTD, there are many good reasons to embrace the new solution. The purpose of introducing MTD is to cut Tax and VAT inaccuracies and generate extra revenue for businesses. Whilst the starting cost of the initiative is higher for low earning SMEs, the scheme is highly efficient which will be beneficial to your business in the long term. MTD-compliant software have excellent tools to help you access HMRC digitally, allowing you to produce invoices, quotes, record receipts, calculate and pay bills, and prepare your payroll quickly.
- How Should Your Business Get Ready for MTD?
As the deadline approaches, your business should implement a MTD-compliant software. You can arrange for this to be installed based on when you begin your financial year. Take the required time to understand the software and how it will fit your business needs. Then, set a budget to prepare for the new initiative, including all the possible costs you may incur regarding MTD, such as resources and staff training.
- Are There Penalties in the Case of Non-Compliance?
Businesses who do not comply with Making Tax Digital risk facing huge penalties. All businesses will need to apply changes to ensure they meet the requirements of the new system. So, as the time approaches for your business to make the transition, start thinking about the benefits of utilising the new technology offerings and investing in the services of tax specialists to help you comply with the guidelines.