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MTDfB will be here sooner than you think


Making Tax Digital for Business, now known as MTDfB, will begin in April 2019 but that doesn't mean you can forget it until then.  Now is the time to start thinking about what you need to do in your business to meet the new reporting requirements.

VAT registered businesses prepare for MTDfBMTDfB starts with businesses which are VAT registered and over the VAT threshold of £85,000.   From April 2019 these businesses will need to be preparing their VAT return within accounts software that can report the figures directly from the software to HMRC.  It does not apply to businesses who are VAT registered but under the VAT threshold. 

If you are already using accounts software you need to ensure that it will be able to meet these reporting requirements.  If you are using an older version of a desktop software such as Sage 50 Accounts you will need to upgrade so will have to plan for and be prepared for this expense. Upgrading can happen at any time because the new software will convert your old data to fit within the new version but there is a limit to how old your data can be for conversion.  Check with your software supplier now to see whether they will be ready with new software for the April 2019 deadline, whether you can upgrade your current version and what the cost will be.

If you are not using any software at all you should consider starting now as it will make reporting your figures a lot easier.  HMRC has indicated that there will be software available which you can use if you keep your records on spreadsheets but there has been no further information on this yet.

Many businesses start their new financial year in April so those businesses not currently using software need to consider starting to use it from April 2018 as this will give them a year to get it set up and used to using it.  Cloud software such as Xero can be set up with bank transactions feeding directly into your software making keeping your accounts less time consuming.  And cloud accounting softwares are constantly being updated so there will be no worry about not being able to upgrade your data.  

If you are planning to change to a new software this should, where possible, be done at the beginning of a new financial year.  If you are moving from spreadsheets to software it doesn't matter so much, although the move should tie in with a new VAT quarter.  So whenever your new financial year starts you should be thinking about how you are keeping your accounts now and whether this will work for MTDfB.

This may also be the time to consider if you need to be VAT registered.  There are many businesses who are VAT registered but well below the VAT registration threshold.  Whilst there are advantages to being VAT registered - you can claim back VAT on your costs and can seem like a larger business than you are - you need to consider whether being VAT registered is still appropriate for your business.  Deregistering before April 2019 will mean you won't have to meet the MTDfB reporting requirements but this may only delay your reporting for a year.

From April 2020 MTDfB will require every person with trading income above £10,000 to report their income and expenses to HMRC every quarter.  This will include sole traders, the self-employed and individuals with income from rental property.  It will not apply to limited companies.  This reporting will also need to be done from accounting software and will not be a summary report as with VAT but will be a full report of all income and expenses during the quarter.  From this HMRC will calculate your quarterly tax liability so that you can plan for it.  It is important, therefore, that you keep your accounts up to date quarterly and ensure that you record all your expenses each quarter so that your tax liability is not calculated on income alone.

Support with setting up your new softwareIt is important for everyone to plan now for how they are going to meet these reporting requirements so that it works smoothly when the time comes. 

We can help you get your accounts setup and give you some training to manage it yourself. 

Start planning for it now and don't leave it too late.




Related Tags:  Accounts |  Business |  VAT | 
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