Last week HMRC finally announced their revised plans for Making Tax Digital (MTD) after it was put on hold whilst the election process took place. Originally MTD was to be implemented for businesses over the VAT registration threshold from April 2018 but this now won't be mandatory until April 2019.
Making Tax Digital is a Government plan to make it easier for individuals and businesses to keep on top of their finances and get their taxes right. For businesses MTD will mean keeping accounts records digitally rather than manually and submitting information directly to HMRC from the software. The announcement also advised that no other accounts information will be required to be submitted digitally before April 2020, although it can be done voluntarily. Businesses are already involved in the pilot and more will become involved between now and April 2019 to ensure the systems are fully tested.
This 12 month delay is welcome for most businesses as MTD seemed to be happening too quickly for finance professionals, such as ourselves, to prepare businesses for it. Now we have an additional 12 months to help them understand the requirements and how it will affect what they need to do.
VAT registered businesses already have to keep their accounts up to date on a quarterly basis in order to submit a VAT return but with HMRC eventually using this information to prepare an ongoing tax account it is even more important for the submissions to be as accurate as possible.
There are a multitude of different accounts softwares available for you to use to keep your accounts up to date - it is just a matter of finding one that does what you need it to do (they don't all have the same functions) and which you can afford on an ongoing basis. Most of them have apps to enable you to raise invoices and keep track of your accounts on the go and there are apps which you can use to photograph or scan a receipt or invoice and send it directly to your accounts thereby reducing the work you need to do. The majority of banks now provide a link between your bank and your accounts software so that your bank transactions feed directly into your accounts enabling you to allocate each transaction with one click. Sounds simple but it is important to understand what you are doing because you can easily get into a mess.
All businesses who are not currently using accounts software should be planning to change to software at the start of their next financial year. That will give 12 months to get used to it. You will be able to get help with setting it up and some training to get you started so you will use it in the best way for your business. You will be able to get used to it in your own time rather than rushing to learn how to do it for your first VAT return after April 2019 and finding you can't. You probably won't be the only one who will need help in that first quarter!
The delay in implementing Making Tax Digital gives us all a little more time. Plan now so you are well prepared for April 2019.