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Another acronym, another deadline creeping up on us!
Whilst we continue to enjoy a lovely warm summer, April 2019 almost couldn’t seem further away. However, beware! April 2019 is an important milestone on HMRC’s Making Tax Digital or MTD journey.
For VAT accounting periods beginning on or after 1 April 2019, MTD for VAT requires all VAT registered businesses with a taxable turnover of £85,000 or more to keep records in a digital form and file their VAT Returns using “software”.
For example, if your VAT accounting cycle runs on a calendar quarter basis, your first MTD VAT return will be the 3 months to 30 June 2019.
HMRC published their latest guidance on July 13, just in time to slip into our holiday reading! For those who want to get into more detail it is contained in VAT Notice 700/22. Otherwise, for now, it is sufficient to know that MTD for VAT requires the use of compliant software capable of: keeping and maintaining digital records; preparing VAT returns using the information contained in those records; communicating digitally with HMRC via their so called Application Programming Interface (API) platform.
The good news is that if your business is already using cloud based accounting software such as Xero, you should have the immediate MTD requirements pretty much covered for now. For now, because MTD VAT is only the first leg of the journey which will also extend to other taxes in the future although not before 2020.
However, if your VAT registered business is not using cloud accounting software, but for example places a heavy reliance on spreadsheets, there will be a lot to consider and action over the next few months.
In this context, I was struck by a recent presentation from Xero that currently only 12% of businesses apparently submit their VAT returns directly from commercial accounting software.
Clark Benefit Consulting Limited
"Our business was growing and our old accountants just weren’t able to offer the timely and proactive advice that we needed. Paul and Martin came highly recommended so we moved to Ashton Allsop. The difference was night and day and they had an immediate impact, they spotted issues not seen before and identified allowances we should have used from HMRC. We speak regularly, we work with them through Xero and other tools they make available and everything is made clear and understandable. We were so impressed that we’ve moved our bookkeeping and payroll and they now complete our R&D applications. They provide a fantastic service and have saved us so much time and money, whilst reducing our total accounting costs. We consider them an extension of our company and couldn’t work without them."
Stephen Hickey, CEO Digital Control Rooms