Making Tax Digital (MTD) comes into effect in April 2019 for all VAT registered businesses.
From this date, HMRC will require VAT returns to be submitted using digital software that’s compatible with MTD.
This shouldn’t come as a surprise to any business owner. The government’s plans to transform the tax system have been widely publicised. Indeed, we’ve written about them here ourselves many times – most recently in our blog ‘The Digital Tax Clock is Ticking. It’s Time to Wake Up!’
Despite plenty of warning though, if our own experience is anything to go by, many business owners have still not fully recognised the implications of MTD, and have yet to make plans for its introduction.
If you’re already using a digital accounting solution that supports MTD, you can relax. But if your business still depends on spreadsheets or ledgers, you need to migrate to a digital solution urgently.
Even if you’re already using an electronic solution, you need to check with your software supplier that it is definitely MTD compatible. Not all are: We know for example that certain versions of Sage and QuickBooks Desktop won’t support MTD. There are likely to be compatibility issues with other software products too, and if you’re relying on an older desktop solution, there’s a good chance you will need to upgrade or move to a subscription version.
In short, if you have an accounts system based on spreadsheets, ledgers or software that’s not MTD compatible, you need to take action NOW!
Just how urgently you need to take action will depend on your financial year:
- If your new financial year is due to start anytime from now onwards
You need to be preparing now to migrate to an MTD compatible system in line with the start of your new financial year.
Being ready to use the new system from the first day of your new financial year will avoid the additional expense and duplication of work associated with adopting a new system part way through the period.
- If you have started a new financial year since 1st July 2018
The financial period in which you will need to start submitting MTD compliant VAT returns may have already begun. If you have not yet adopted an MTD compliant software solution, you need to take immediate action.
You have two options:
- You can make the switch from spreadsheets, ledgers or non MTD compatible software part way through your financial year. But migrating to a new system mid period will involve redoing work you’ve already done, is likely to be a logistical challenge, and will incur additional charges from your accountant who will have to work from two systems.
- You can choose to buy yourself a little more time by moving your financial year end to 30th June or earlier. If you do opt to shorten your accounting period though, avoid moving it to March 31st. This is already the most popular year end date – and coincides with the end of the tax year. As a result, most accounting practices will already be working at capacity.
Don’t Leave It Too Late. Migrate Now!
MTD is the biggest change to the tax system in decades. If you own a VAT registered business operating an accounting system incompatible with MTD, time is running out to put things right.
- If you’re still using spreadsheets or ledgers, talk to your accountant about migrating to an MTD compatible solution NOW.
- If you’re using accounting software you’re not sure is compatible with MTD, check with your provider NOW.
MTD will have a real cost for businesses that fail to prepare. Besides the expense and inconvenience of doubling up on work, and higher bills from accountants, any delay in paying VAT on time will incur the usual surcharges – and HMRC won’t be accepting any excuses.
If you’re considering extending your property, creating a garden office / studio, or undertaking renovation work to create a home office space, you should seek professional advice from an accountant first. Taking account of your personal situation, they’ll be able to recommend the most tax-efficient option for you.
Arrange a consultation to discuss your MTD migration plan!
Call us now on 01235 868888 or email us at [email protected]
