A big one for this week’s Ask the Accountants – Making Tax Digital.
What is it? Why could it be relevant for your business? Jenny’s got everything you need to know in this straightforward beginners guide
Not able to watch the video? Scroll down to find a full transcript.
“Hello it’s Jenny, back again with another edition of Ask the Accountants.
So it’s a big one today, and one that’s looking like it will evolve over the coming years, yes that’s right, we’re talking about Making Tax Digital.
Jess in St Ives got in touch to say ‘Help! My business is forecasted to start turning over more than £85,000 over the next few months, will I have to register for Making Tax Digital? I’m not even sure what it is!’
Well don’t worry Jess, we’re here to help! Wonderful to hear business is booming, but you’re right, you’re approaching the VAT registration threshold, so it’s important to get to grips with what this will mean for your business, especially with the Making Tax Digital, or MTD, requirements.
So MTD is a part of HMRC’s plan to modernise tax in the UK. It’s designed to help self-employed people and businesses keep on top of their accounts and manage their accounts properly.
Right now, and we’re in summer of 2020 here, Making Tax Digital is only related to VAT, but it’s widely thought that other taxes will fall under this umbrella in the future as the initiative has not just been called ‘making VAT digital’.
So although we’re only talking about Making Tax Digital for VAT today, it’s definitely worth keeping an eye on what happens further down the line even if you fall under the VAT threshold.
If we take a look at what Making Tax Digital means in practice, the clue is kinda in the name, It’s all about ensuring your records are stored digitally, and that your VAT return is filed to HMRC using MTD-compatible software.
This all kicked in on the 1st of April 2019, so many companies are all over it, however, if like Jess, things are changing in your business and you haven’t been VAT registered to this point, you’ll need to make sure you’re all ready to go.
Chances are, if your business is turning over amounts around the VAT threshold, you’ll have an accountant who is perfectly placed to hold your hand through the transition.
Although you can of course submit VAT returns yourself, it can be much more complicated than it first appears, so it is strongly recommended that you use an accountant to do this, which I would say even if I wasn’t an accountant myself!
Practically though, good accountants are already supporting clients with MTD. We’ll be able to advise you of the best MTD-compatible software to use, help you with your digital information storage, and even with the transition from paper records to digital records if required.
From what we’ve seen amongst our clients, those that have made the switch to Making Tax Digital are well away and are happily storing everything digitally as they go, safe in the knowledge that they aren’t at risk of any fines from HMRC for non-compliance, which is always good to know!
If you’re keen to join them, give us a call to discuss your requirements, and like I say, keep an eye on our website for updates about any other business taxes that may fall under Making Tax Digital in the future.
So until next time, goodbye!”