Do you run a VAT registered business turning over more than £85k?
if you do, depending on when your year-end falls, your business should either already be Making Tax Digital (MTD) compatible – or in the process of preparing to be MTD ready very soon.
The government’s well-publicised plan to transform all aspects of the UK’s tax system through MTD is now beginning to be rolled out. First to be impacted as the changes start to be introduced are VAT registered businesses with a taxable turnover exceeding the minimum threshold for compulsory registration – currently set at £85k.
From April 2019, HMRC will require all such businesses to keep digital records and to file their VAT returns using digital software that’s fully compatible with MTD.
This means that if up to now, your business has been relying on paper-based record-keeping, or desktop solutions not supported by MTD, you need to urgently transition to a new, MTD compliant accounting system.
Ideally, adopting a new system should be done at least 1 month ahead of the start of a new financial year. It will take time to set up, to integrate with online banking, populate with customer and supplier data – and of course to train staff. Introducing a new system part way through a financial period is to be avoided if at all possible as it’s almost certain to disrupt normal business.
The date by which you need to make the change is determined by the year-end date your business works to:
> Businesses having a year-end July 2018 – January 2019
The bad news is that if you have a year-end between July 2018 and January 2019, you’re already into the financial period in which this change applies.
It’s not a good idea to make the transaction part-way through your financial year, so you’re going to need to go back to the beginning of this financial year and start from there, or shorten your current financial year to make the transition smoother. As a result, the sooner you take action, the less time you’ll have to spend going back over your accounts, inputting data into a new system.
> Businesses having a year-end from February 2019 onwards
You still have time to transition with minimal disruption to your business – but you need to act quickly.
If like many other businesses and self-employed people, your year-end is 31st March or 5th April, MTD is a major issue you must address now. You only have what remains of February and March to implement a new system: leave it any later, and you’ll be playing catch-up – with all the frustration and challenges that this will bring.
Say for example you have 4 rooms in your home and use one of them exclusively as an office, you can claim tax relief on 25% of your allowable expenses.
It’s important to be aware that a qualifying room cannot be a common area such as a hallway, landing, bathroom, kitchen or utility room.
Already Gone Digital? Two Important Things to Check
If you’ve already made the switch to a digital accounting solution, great: but there are still two important things you need to check:
> Is your accounting software MTD compatible?
Even if you’re already using a digital 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 desktop software 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.
If you have to upgrade your desktop system anyway, then maybe this is a great time to head to the cloud. Doing so will reduce the risks associated with having your accounts on one PC – and the frustrations of only one person being able to work on the accounts at any point in time.
> Is your accountant MTD ready?
There are still some traditional accounting practices that have yet to fully embrace working in the digital environment. You need to have a conversation with your accountant to understand their capabilities, and to make sure they are able to work with the digital accounting solution you’ve opted for.
Don’t Leave It Any Longer: Let Inca Help You Get MTD Compliant Now!
Making the change to digital accounting is not something you can put off. But even at this late stage, you can minimise the impact to yourself, your team and your business.
Inca can assist you with all aspects of transitioning to an MTD compatible system, including helping you decide which solution is best for your business and providing bespoke training. We are able to support a wide range of HMRC approved digital accounting products and have access to discounted subscriptions for QuickBooks, ClearBooks and Xero.